July 1, 2008: Plenty of companies are angling to make money off climate change sometime in the future. The insurance industry isn’t waiting around for the science or the politics to settle: It’s raising premiums now on the premise that rising temperatures will lead to more hurricanes, more damage, and more claims.M.P. McQueen reports today in the WSJ that insurers across the U.S. are increasingly relying on “computerized catastrophe modeling” which tells them just what they want to hear: Hurricanes will get bigger and more frequent in coming years, so homeowners in coastal areas have to pony up even more to protect their houses—even as insurers rack up record profits. The shift from using historical data to computer models is to blame, the paper says:
Companies that rely too heavily on cat-model data “are subjecting their businesses and their customers to the volatility of computer models,” says [Karen] Clark, who now runs a Boston cat-model consulting business. “The models are being used as if they produce definitive answers rather than uncertain estimates.” Ms. Clark says she advises clients to use them in conjunction with other factors, such as broad historical data. More >>>
