Lloyd’s boss demands action on climate change
AFP, 12 January 2007 – Governments and businesses must act now against climate change, and the United States needs a bigger public debate about its risks, the chairman of the Lloyd’s insurance market said Friday.
Peter Levene warned that vast storms bigger than Hurricane Katrina are likely to batter the United States in coming years despite a relatively calm 2006 Atlantic hurricane season.
“Today the insurance industry faces the prospect of a 100-billion-dollar mega-catastrophe twice the size of Katrina,” Levene said in a speech at Washington’s National Press Club.
Levene, formerly a skeptic on climate change, runs the world’s biggest insurance market at London-based Lloyd’s.
Lloyd’s manages some of the world’s most complex insurance risks, from celebrity body parts to oil rigs, and extends billions of dollars in global coverage.
The market expects to pay out six billion dollars in claims related to the record-setting 2005 US hurricane season, largely due to the devastating impact of Katrina on southern states like Louisiana and Mississippi.
Levene said Lloyd’s is planning for fresh disasters, but questioned whether US lawmakers are seriously heeding the dangers posed by climate change.
“We cannot risk being in denial on catastrophe trends. So, two years after Katrina and one year away from a national (US) election, where’s the public debate on catastrophe trends?” he said.
“Over the coming years, with warmer sea surface temperatures making wind-storm landfall more likely, particularly destructive storms are a likely scenario.”
The insurance market chief called for tougher US building codes in coastal areas and said public awareness should be raised about the risks of more volatile weather patterns.
“We can expect the storm season to lengthen, and we will be at risk over a wider geographical area than ever before.”
Levene argued against “political interference” in the pricing of risk premiums and expressed confidence that most “natural perils” can be insured if free market forces are allowed to prevail.
However, large US home insurers including State Farm and Allstate are refusing new business along wide stretches of the US east coast amid mounting concerns about bigger hurricanes.
Allstate is not issuing new homeowner policies in New York, where millions of people live just above sea level, and some insurers are refusing to pay Katrina claims, arguing that damage was caused by flooding instead of wind.
Generally, only the federal government offers US homeowners insurance against flood damage.
Levene criticized US regulations which he said discriminate against foreign insurers, requiring them to post collateral equal to 100 percent of their gross liabilities. In Lloyd’s case this equates to over eight billion dollars.
“Domestic reinsurers have no such obligation,” Levene chafed, calling for such “discrimination” to be ended.
The administration of US President George W. Bush has abandoned the Kyoto Protocol against climate change, but Levene said many state and local governments were working to reduce their own carbon dioxide (CO2) emissions.
Levene said addressing climate change is good for the environment and a company’s earnings, citing an initiative by US chemical group DuPont to slash its emissions of warming gases and lower its energy costs.
“Even if we stop all man-made CO2 emissions now, we would still endure 30 years of warming before the effects take hold,” Levene said.
“But we must not use that as an excuse not to act. History and future generations will surely not forgive us if we do.”
The Atlantic hurricane season typically runs from June to November.
This article is reproduced with kind permission of Agence France-Presse (AFP) For more news and articles visit the AFP website.