Insuring the uninsurable


In response to an article on The Australian Financial Review website, we posted a thread of tweets this morning. It got picked up on by Dr Kate Marvel, Peter Lipman and a few others and has since generated more retweets, replies and likes than any other post we’ve ever done. You can view it here, or read it in full here.

If you’re looking for the sort of thing that will actually make people and politicians sit up and suddenly start prioritising action to tackle and adapt to climate change, this might be one of them.

In the near future, insurance companies will likely stop insuring homes, buildings, farms, factories, schools, hospitals etc, etc, that they judge to be under imminent, inevitable and constant threat of damage because of climate change. We’re talking here about properties that are at risk of being permanently inundated by rising sea levels, but also those on river flood plains, those in forests that regularly burn and those on the edges of ever encroaching deserts.

These are not the theoretical musings of a small Climate Change NGO, this is what giant insurance companies like IAG, AXA, Allianz and Swiss Re are saying themselves.

"We have been very vocal [on the fact that] something will have to change because you cannot continue to have the carbon emissions and think that the world will be insurable," (Jackie Johnson, IAG).

For an insurance company, the risk of insuring, say a sea front restaurant that is going to get catastrophically flooded every winter, is far too high. They would be paying out way more than they can recoup through insurance premiums - especially when the restaurant is just one of thousands of seafront properties that need to be insured.

When Prof. Jem Bendell and others write about the social collapse that climate change is likely to usher in, this is the sort of thing they’re talking about - the disintegration of the insurance industry.

Insurance is one of the cornerstones of a functioning society. Nobody wants to live in an uninsured home, but nobody wants to buy a home that is uninsurable either. In not so many years time, millions of (seriously angry) people will be trapped in very precarious houses.

Will nation states step in to provide insurance for those who can’t afford or even find insurance on the open market? Will nation states be able to afford to insure the millions of homes that are threatened by coastal flooding, river floods, forest fires?

‘Deep Adaptation’ is about having the foresight now to start moving people, businesses, public services, power stations, etc, away from threatened areas so that they are not left stranded in buildings that they can’t sell, can’t insure and ultimately can’t survive the onset of climate change.