Climate impacts are crippling insurance – Big Oil must pay up

Ian Duff is head of Greenpeace International’s Stop Drilling Start Paying campaign. 

Extreme weather events have a hefty price tag. Last month, Typhoon Carina in the Philippines struck a region home to 13 million people. Greece’s wildfires cost tens of millions of euros. Floods have affected over 700,000 Africans.

Last year, similar weather events cost $301 billion. Reinsurance company Munich Re found they drove insured losses 70% above historical norms. By 2050, climate change could cause an additional $12.5 trillion in losses worldwide, according to a World Economic Forum analysis.

A key question is: who pays for all of this? The insurance sector used to provide the answer.

Extreme weather events have affected human societies for millennia, and human ingenuity helped us adapt economically to disasters by transferring or distributing risks.

Before modern insurance schemes were developed in 17th century London, such principles were already applied by Chinese, Babylonian and Egyptian traders, and by investors and sea merchants who were only liable to pay back if their ships weren’t swallowed by deadly storms.

Yet with violent weather events turning more numerous than at any other time in history, insurers are finding their original purpose becoming unsustainable.

In France, insurers are being forced to raise premiums to unattainable levels, the state is stepping in and drivers are asked to park under cover during hailstorms. In Germany, just one out of two residential buildings are adequately insured, and it is even worse in regions like Bavaria.

Hurricane Beryl, which struck the Caribbean and the Gulf Coast, is expected to increase insurance premiums for Texan homes, In parts of California, Florida, and Louisiana, homes and other property are becoming entirely uninsurable, left to face wildfire and hurricane risks.

And in Global South countries, hit hardest by climate change, much of the population has no access to insurance whatsoever. 

The insurance gap is a critical issue which the industry, regulators and even the United Nations are struggling to confront.

The model of insurance is faltering. Alternative models need to prioritise resilience and affordability over profits.

Who can foot the bill? It may be insurance companies, the government (at the expense of taxpayers), or households who suffered the damage.

How about making those who caused the damage pay for it?

Without human-induced climate change, extreme weather events would be far less frequent and less intense. And without the fossil fuel industry, there wouldn’t be a crisis on such a scale.

International oil and gas companies are not only some of the world’s largest polluters. They have also known about climate change for many decades, while continuing to extract fossil fuels.

Some engaged in denying science and obstructing climate action, perpetuating our dependency on their products. In parallel, they raked huge profits from people’s suffering.

We’re digging ourselves into a hole: premiums go up due to climate change, governments use taxpayer money to pick up the bill, while international oil companies continue to rake in billions in profits and expand their climate-wrecking projects. This triggers more extreme weather, higher costs, and a further rise in premiums.

It doesn't have to be like this. To address the growing insurance gap, insurers must hold oil and gas companies liable for lost earnings rather than raise their premiums, as they once did against tobacco companies for deceptive business practices.

In tandem, governments must act. Taxing fossil fuel companies in the world’s richest economies could raise $900 billion by 2030.

Forcing oil and gas companies to pay for loss and damage would address the insurance gap both practically and fairly. It would allow affordable insurance to be maintained and expanded for all, ensuring those who profit from pollution bear the costs of the impacts.

Being held liable for climate damages will also make the oil and gas sector an increasingly bad bet for investors. The managed decline of the fossil fuel industry isn't just about reducing supply and demand. It is also ensuring the wealth accrued by the industry flows to those most impacted by the climate crisis.

Both outcomes would present a victory for people and nature.