Climate change sceptics and deniers need to go no further than their home insurance bills to confirm that we are all starting to pay for the impacts of climate change.
As the financial arbiters of risk and associated costs, the global insurance sector has started passing on the cost of climate change to consumers. And like climate change, the financial impacts are truly global.
The cost of an extreme natural disaster in one country is shared globally through the re-insurance sector. Re-insurers are global insurance companies that insure smaller national insurance companies against the cost of extreme weather events. The rise in your home insurance premiums is in large part driven by the increasing cost of natural disasters driven by climate change and spiralling construction costs globally.
The devastating fires that burnt through areas of Los Angeles will have an estimated total cost of between $US250 billion and $US275 billion making it the most expensive natural disaster in US history.
US insurance companies will have to access funds from their re-insurers to pay out the claims. The re-insurance sector will then raise the premiums insurance companies pay wherever they operate to cover these astronomical costs.
Much closer to home and the costs associated with cyclone Alfred will further drive premiums upward as the Insurance Council of Australia has declared Alfred an “insurance catastrophe”. Add to this the North Queensland floods and the other extreme climate events including devastating fires, heatwaves and drought and the pressure to raise insurance premiums locally becomes irresistible.
Insurance premiums is where the global climate crisis hits the average family’s hip pocket nerve. To prevent its bankruptcy, the insurance sector has no choice but to continue to raise its premiums as the global climate becomes more extreme and more unstable.
There is a plausible scenario that certain parts of Australia insurance will become too expensive to insure as re-insurers refuse to cover national insurers forcing these companies to exit certain geographic areas.
The only conclusion can be that either way Australian households are starting to pay for the costs of climate change here and globally. People opposing the transition to renewables and a low carbon future cite the cost of addressing climate change. However they never cite the cost of inaction which is, in small part, reflected in the ballooning costs of insurance and the cost to Australian households.
