Government Insurers ill Prepared for Climate Perils

Government Insurers ill Prepared for Climate Perils

   
April 2007 -   The federal government 
flood and crop insurance programs have failed to address the 
increased risks likely to result from global warming, finds a 
new report prepared by the investigative branch of Congress, 
the Government Accountability Office, GAO. 
The report,"Climate Change: Financial Risks to Federal and 
Private Insurers in Coming Decades are Potentially 
Significant," was commissioned by the chairs of the Senate 
Committee for Homeland Security and Governmental Affairs, 
Senators Joe Lieberman, a Connecticut Independent, and 
Republican Susan Collins of Maine, and released at a committee 
hearing Thursday. 
"The rapidly mounting evidence of climate change depicts a 
threat that extends even beyond vital environmental and social 
concerns," said Senator Collins, the committee's Ranking 
Member. "Global warming also Threatens to burden consumers and 
taxpayers with billions of dollars in added costs as insured 
losses from floods and storms cause increases in federal 
spending and insurance premiums." Senator Susan Collins of
 Maine listenvironment news to the evidence at the 
Committee for Homeland Security and Governmental Affairs 
hearing Thursday. 
"Weather-related events have cost the nation billions of 
dollars in damages over the past decade," the report states. 
These losses are borne by private insurers and by two federal 
insurance programs - the National Flood Insurance Program, 
which insures properties against flooding, and the Federal 
Crop Insurance Corporation, which insures crops against 
drought or other weather disasters. 
Since 1980, National Flood Insurance Program's exposure 
quadrupled, nearing $1 trillion in 2005, and program expansion 
increased Federal Crop Insurance Corporation's exposure 
26-fold to $44 billion. 
Major private and federal insurers are both exposed to the 
effects of climate change over coming decades, but are 
responding differently, writes the report's lead author John 
Stephenvironment newson, director of the GAO's Natural Resources and 
Environment division. 
Many large private insurers are incorporating climate change 
into their annual risk management practices, and some are 
addressing it strategically by assessing its potential 
long-term industry-wide impacts. "The two major federal 
insurance programs, however, have done little to develop 
comparable information," the report states. 
"The private insurance industry, driven by the discipline of 
the marketplace, has been paying serious attention to 
increased risks presented by climate changes," said Collins. 
"But federal insurance programs, on the other hand, have done 
little to develop the kind of information needed to understand 
programs' long-term exposure to climate change." 
In arriving at these conclusions, GAO investigators reviewed 
key scientific assessments, analyzed insured loss data, and 
contacted private insurers, the National Flood Insurance 
Program, and the Federal Crop Insurance Corporation. 
The key assessments the GAO reviewed generally found that 
rising temperatures are expected to increase the frequency and 
severity of damaging weather-related events, such as flooding 
or drought, although the timing and magnitude are as yet 
undetermined. 
The global average surface temperature has increased by 0.74 
degrees Celsius over the past 100 years and climate models 
predict additional, perhaps accelerating, increases in 
temperature, the report states, citing the Intergovernmental 
Panel on Climate Change among other scientific reports. 
The GAO cites the conclusions of major scientific bodies that 
"human activities, including the combustion of fossil fuels, 
industrial and agriculture processes, landfills, and some land 
use changes, are significantly increasing the concentrations 
of greenhouse gases and, in turn, global temperatures." 
Determining the precise nature and extent of the relationship 
between average global temperatures and weather-related events 
is an exceedingly challenging task, the GAO acknowledges in 
the report. 
"Nonetheless, a key assessment of climate model projections 
indicates that an increase is likely in the frequency or 
severity of damaging extreme weather-related events." 
"Two major federal programs which, as a consequence of both 
future climate change and substantial growth in exposure, may 
see their losses grow by many billions of dollars in the 
coming decades," according to the report. 
Floodwaters flow through the historic Black Rock Mill along 
Seneca Creek in Germantown, Maryland due to record rains 
across the Mid-Atlantic region. June 27, 2006. 
At the hearing Thursday, Senator Collins stressed the need to 
take "senvironment newsible steps in many areas to lead us to a more stable 
climate future." Since she was elected to the Senate in 1996, 
Collins has met with numerous climate researchers, and says 
she has seen the effects of climate change on snowfall, ice 
caps, and glaciers. She is a cosponsor of the Climate 
Stewardship and Innovation Act and will soon introduce 
legislation designed to reduce U.S. greenhouse gas emissions 
and slow climate change. 
Conservationists agree with the report's conclusions and urge 
the government to address the issue immediately. 
"We commend Senators Lieberman and Collins for exposing the 
inadequacies of federal insurance programs to protect 
taxpayers from catastrophic losses due to global warming," 
said David Tuft, campaign director of the Natural Resources 
Defense Council's Climate Center. 
"Not only has our federal government thus far failed to take 
action to prevent the worst consequences of unchecked global 
warming pollution, but it has failed fundamentally to take 
reasonable precautions against global warming-induced storms 
and drought, and the high costs that will be borne by 
families, businesses and ultimately, taxpayers," Tuft said. 
From 1980 to 2005, private and federal insurers paid a total 
of more than $320 billion in claims on weather-related losses. 
the GAO reports. 
Nearly 750,000 turkeys were lost to flooding in Duplin County, 
North Carolina as well as 100,000 hogs. This owner, Alan 
Reynor, lost at least $85,000 plus cleanup costs. He also lost 
2,500 hogs and his corn crop. September 1999. 
Claims varied from year to year due to the effects of 
catastrophic weather events such as hurricanes and droughts 
but have increased over this period of time. 
The growth in population in hazard-prone areas and resulting 
real estate development have generally increased liabilities 
for insurers, and have helped to explain the increase in 
losses. 
Due to these and other factors, federal insurers' exposure has 
grown substantially and is expected to increase as the climate 
warms, the GAO finds. 
The GAO report acknowledges that the federal insurance 
programs are not profit-oriented, like private insurers. 
"Nonetheless," it concludes, "a strategic analysis of the 
potential implications of climate change for the major federal 
insurance programs would help the Congress manage an emerging 
high-risk area with significant implications for the nation's 
growing fiscal imbalance." 
Congress established the Federal Crop Insurance Corporation in 
1938 to temper the economic impact of the Great Depression and 
the weather effects of the dust bowl. In 1980, the Congress 
expanded the program to provide an alternative to disaster 
assistance for farmers that suffer financial losses when crops 
are damaged by droughts, floods, or other natural disasters. 
Farmers' participation is voluntary, but the federal 
government encourages it by subsidizing their insurance 
premiums. 
The GAO is recommending that the secretaries of agriculture 
and homeland security analyze the potential long-term fiscal 
implications of climate change for the Federal Crop Insurance 
Corporation and the National Flood Insurance Program, 
respectively, and report their findings to the Congress. 
In commenting on a draft of this report, the two agencies 
agreed with the recommendation. 
This mobile home in the coastal community of Johnson Bayou, 
Louisiana was destroyed by the tidal surge from Hurricane 
Rita. Someone painted on the siding, "Gone With the Wind." 
September 2005. 
Commenting for the Department of Commerce, Undersecretary for 
Oceans and Atmosphere Conrad Lautenbacher, went a step further 
than the report, warning that coastal communities are 
especially vulnerable to the risks of climate change related 
weather events. 
"The report should examine coastal development impacts more 
rigorously," Lautenbacher wrote. 
He cites research showing that, "coastal development has 
increased the vulnerability to winter storm surge, wind damage 
and hurricanes. These vulnerabilities, due to high risk 
coastal development, will only be amplified by climate change 
related increases in the frequency or severity of high impact 
extreme weather related events." 
"We can no longer afford to let political considerations blind 
us to the realities of rising global temperatures," said the 
NRDC's Tuft. 
"As we saw with the response to Hurricane Katrina, our 
government is woefully ill-prepared to protect its citizenvironment news 
against catastrophic losses," said Tuft. "Now this report has 
blown the whistle on how ill-prepared we are as a nation for 
further destruction. The key is that there is still time to 
reduce the threat of global warming, and avoid the worst 
consequences." 

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