Insurers are fleeing states because of climate realities, not anti-wake bullies

A hostile letter from a group of “anti-awakened” US Attorneys General targets major insurers who have joined the Net-Zero Insurance Alliance.

The alliance was created to help insurers as an industry think about climate risk and net-zero goals. It works much like the US Chamber of Commerce or the National Association for Manufacturers in America, with work on standards and goals. The alliance wasn’t seen as controversial until Republican activists decided that anti-environmental, social and governance, and anti-climate actions could potentially win votes and affect election results.

On net-zero targets, the May letter complains that: “The drive to force insurance companies and their customers to rapidly reduce their emissions has led not only to rising insurance costs, but also to high gas prices higher for products and services worldwide board of directors, resulting in record inflation and financial hardship for the residents of our states”. The letter goes on to attack the alliance’s net-zero goals, warning of possible antitrust action.

The attacks seem to work.

The Net-Zero Insurance Alliance has begun hemorrhaging membership, losing nearly 50 percent of its members in recent weeks. Its president, the French company AXA, was saved. Other companies joined the exodus. Tokio Marine Holdings Inc., Japan’s largest insurer, is out. Lloyd’s of London jumped ship. The Spanish Mapfre jumped. As did the Japanese SOMPO. Munich Re also took the lifeboats.

The future of the alliance looks bleak for the present.

The Republican state attorneys general won, right?

Wrong.

What the insurers were doing in the alliance, exchanging views, considering paths and net-zero measurements, has nothing to do with US or European Union antitrust law.

Companies are responding to bullying by exiting, but they won’t change their crucial orientation towards net-zero goals. The travails of the alliance do not mean that these profit-focused, risk-focused, math- and science-driven companies will stop measuring climate risks and act accordingly. The very existence of these companies requires a careful assessment of current and future climate risks.

Republican politicians cannot change the climate and related insurance risks, which companies must factor into their business decisions. Threatening letters can only go so far.

All insurers and reinsurers around the world are adjusting their models, canceling policies and exiting markets.

Make the decision by State Farm, California’s largest insurer, not to write new policies in the state. Why? Because catastrophic risks are growing too fast to insure them profitably. AIG has also taken this same step. These and other risk-sensitive insurers understand that they need to stop offering policies to ensure their company’s viability.

The alternative is bankruptcy.

Last year in Florida, six insurers went bankrupt and were unable to pay policyholder claims for repeated extreme weather disasters. A seventh went belly up in 2023 after the last hurricane.

The situation is also dire in Louisiana, where eight insurers went bankrupt last year.

If homeowners can get flood insurance, the costs are bound to get higher and higher. Eventually parts of the United States – Miami, the Florida Keys, New Orleans – will become uninsurable.

This is the reality-based economy that drives sound business decisions. Bullying letters from lawyers cannot change these alarming weather facts and climate risks.

Republican attorneys general may have the Net-Zero Insurance Alliance in momentary disarray. But climatic facts and stubborn business decisions cannot be avoided.

California’s weather extremes won’t get better, just worse.

Hurricanes that hit Florida, Louisiana, Texas and elsewhere are worse today than ever before. Costs for the insured and the uninsured will continue to rise.

As the oceans warm and the level of seals increases, costs go up. Recent research estimates the cost at between $120 and $500 billion this century, depending on whether or not the green transition is optimal.

There is no prospect of that changing for the better. Hotter, windier, wetter, drier and more destructive summers are in our future.

For example, a new study predicts that a possible multi-day heat wave blackout in Phoenix could send half the city to emergency rooms. Thousands could die; the social and economic costs of such a tragedy would be immense. This dire prediction echoes the horrific opening of the book “Ministering for the Future.”

State Attorneys General, if they really care about the future of their constituents and want to ensure better economic prospects and outcomes, should start suing the worst greenhouse gas polluters, companies and actors who make an increasingly serious situation worse . State attorneys general should pursue stringent net-zero goals in their states, not harass insurers. They should change local rules and regulations, tighten building standards, reduce local and city GHG emissions, change incentives, and punish freeloaders and those who would risk a livable tomorrow for a quick buck today.

Will Republican state attorneys shift focus and start directly addressing climate risks? Maybe not today, but definitely soon. Voters will ask as much as climate risks escalate, overtaking the mad pursuit of insurers who understand what a greenhouse future looks like and what needs to be done about it.

Stuart Mackintosh is the author of “Economics of the climate crisisand executive director of G30.

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