Rising Cost of Climatic Disasters Giving Insurers Pause, Report Says

Climatic disasters are causing such expensive damage worldwide that the insurance industry and, increasingly, bankers have plunged into studies of global warming. Their interest injects new economic concerns into a scientific debate over the product of another collection of corporate giants--the petroleum industry.

Those are the findings of an annual study of global environmental and population developments conducted by the Worldwatch Institute.

The independent research organization, which has previously warned of growing grain prices stemming from the increased competition for food around the world, said disasters during the first half of the decade have cost the insurance industry more than three times as much as storm damage throughout the 1980s.

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As a result, institute President Lester R. Brown said Saturday, the insurance industry’s concerns place it at odds with the petroleum industry because the burning of fossil fuels is considered a potential cause of climate change, particularly global warming.

The findings are included in the institute’s annual report, State of the World, which was issued Saturday.

Since 1990, the insurance industry worldwide has paid out $48 billion for weather-related losses, “compared with losses of $14 billion for the entire decade of the ‘80s,” wrote Brown and co-author Christopher Flavin, vice president for research at the institute.

The disasters included Hurricane Andrew, which struck the Florida coast in August 1992 and caused an estimated $30 billion in damage, and floods last winter in northern Europe that cost $3.5 billion.

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Brown acknowledged that greater coastal development and higher real estate costs were responsible for some of the increased damage totals, but these factors do not “begin to match the increasing [risk] the insurance industry is facing.”

The insurance industry is so concerned that it is paying for exhaustive research on the human-induced aspect of climate change, Brown said.

The interest shown by that industry and, to a growing extent, bankers concerned about long-range real estate investments, would introduce powerful economic incentives to the debate over global warming.

While the scientific community is not unanimous in its judgment, there is growing support for the theory that if average global temperatures are increasing, fossil fuels and the resulting higher levels of carbon dioxide are playing an important role.

“The entry of the insurance industry into the debate on climate change is a potential watershed,” the report said, citing the industry’s successful effort to establish stricter fire and auto safety standards in the United States.

“After suffering billions of dollars of losses from more intense storms and other related disasters in the early ‘90s, some insurance executives are joining the call to slow climate change,” the report said.

The institute has been known for bleak forecasts that conservative organizations often challenge as unsupported cries of doom. In addition, its forecasts have differed with the generally more optimistic tone of studies by the World Bank.

Worldwatch focuses research on global environmental issues involving energy, food and population. Half its funding comes from sales of its reports, and half from organizations such as the Ford and Mellon foundations.

The report also draws attention to the growing competition in the world’s oceans for a dwindling supply of fish.

The year 1995 saw more conflicts between nations over fishing territory than occurred in the entire 19th century, Brown said. “That’s something that’s not going to go away,” he said.

But similar pressure is growing as a result of limited grain harvests and increasing prices.

“Barring any new technologies that can lead to quantum jumps in food production, like the discovery of fertilizer or the hybridization of corn, the world is facing unprecedented difficulty on the food front,” the report said.

It continued:

“The lack of growth of the world grain harvest since 1990 coupled with the continuing growth in world population and the increased likelihood of crop-damaging heat waves in the years ahead at least carries the potential of severe food shortages. . . . Food prices spiraling out of control could trigger not only economic instability but widespread political upheavals.”