In a report entitled “Climate Change and The Insurance Industry”, the world’s largest insurance market was advised as follows in February 1993: “It would behove the industry to look very closely at where all capital is invested. Fossil-fuel-related operations should be eschewed, and solar energy and energy-efficiency projects favoured.” I remember that well. I wrote the report, and presented it at Lloyd’s of London, before a large audience of worried-looking reinsurers. Below is an extract from my book, The Carbon War, first published in 1999, describing the event, and a link to the original report.
On 21st January 2018, they finally decided to divest from coal, the most dangerous fossil fuel in terms of climate change. An issue arises here. By delaying a quarter of a century enacting what is surely such an obvious self-protection measure, how much damage has Lloyd’s done to investors who have placed their trust in them, in the interim, when it comes to weather-related disasters.
Extract from The Carbon War:
February 1993, London
When I returned to Lloyd’s of London for the second time, it was to give a seminar. Over the Christmas break, I had written a report on my basic case on the implications of global warming for the insurance industry. During January, I had the report reviewed within the insurance industry. Lloyd’s experts, and the head of Munich Re’s technical team, had ironed out the glitches for me, thus giving the report a vital layer of credibility. Greenpeace offices around the world were set to release the report to the media immediately after my presentation to Lloyd’s.
Richard Keeling, recently appointed to the Council of Lloyd’s, and Chairman for the seminar, met me at the door. “Don’t scare them too much,” he told me with a small grin as a hundred or so underwriters and agents filed into the mock-ancient lecture room in the heart of the ultra-modern building. “They have so much to worry about at the moment, poor dears.”
Not just them. In Hawaii during December, the Hawaiian Insurance Group – the State’s fifth biggest insurer – had announced that its huge losses meant it had to cease trading. Other Hawaiian insurers immediately issued an indefinite moratorium on the writing of new policies. First Insurance, Hawaii’s biggest insurer, announced that it would cease renewing existing policies as of 1st February 1993. 38,000 homeowners would then be stranded, without insurance for their homes. In Florida, things were just as bad. As the full extent of the losses from Hurricane Andrew became clear, amid bankruptcies among the smaller insurance companies, the state Insurance Commissioner pushed emergency legislation through, mandating $500 million in claims to hurricane victims who had been left stranded by the collapsed companies.
Then on December 10th, New England was hit by one of its worst-ever storms. Dubbed “The Great Nor’easter of 1992” by insurers, it flooded the New York subway, causing it to be closed down for the first time in its history. Hurricane-force winds, heavy rains, river and tidal flooding, and massive snowfalls caused $650 million in insured losses. The barrage dragged houses into the sea, wreaked havoc along 600 miles of coastline, killed at least 18 people, and caused a state of emergency to be declared in New York, New Jersey, and Connecticut.
I gave my lecture in Lloyd’s to a particularly attentive audience.
I waited to see how the release of the report would go. Greenpeace Germany’s ace campaigner Wollo Lohbeck phoned me that night to say that he had six live radio interviews the next morning, and would I please tell him what the report was all about? In the week thereafter, he clocked up dozens of radio and print interviews. Greenpeace Netherlands and Denmark also reaped superb coverage. Greenpeace Norway opted for an “exclusive,” and this resulted in a long and prominent story in one of Norway’s major papers, where normally the whaling issue made good coverage for Greenpeace impossible to come by.
In Japan, Yasuko Matsumoto was over the moon. Asahi Shimbun gave the report a quarter of a page. The journalist who covered it had done some research of his own on the subject. One of his interviewees, Toshifumi Kitazawa, an executive at the giant Tokyo Marine and Fire insurance company, proved to have – as the article put it – “the same sense of crisis as his counterparts abroad.” Kitazawa had no doubt what was afoot. “Behind these events,” he told Asahi, “are the global-scale changes in climate patterns.”
In 1991, Typhoon Mireille had involved payments ten times higher than the highest paid for typhoon damage in Japan before. An un-named source in the Japanese Marine & Fire Insurance Association told Asahi that “if more disasters like (Mireille) follow, it could affect the industry’s very existence.”