Hurricanes haven’t convinced Americans that climate change is real. Higher insurance preimiums might

The aftermath of Hurricane Michael in Florida. Image: Getty.

One of the great challenges of tackling climate change is making it real for people without a scientific background. That’s because the threat it poses can be so hard to see or feel.

In the wake of Hurricanes Florence and Michael, for example, one may be compelled to ask, “Was that climate change?” Many politicians and activists have indeed claimed that recent powerful storms are a result of climate change, yet it’s a tough sell.

What those who want to communicate climate risks need to do is rephrase the question around probabilities, not direct cause and effect. And for that, insurance is the proverbial “canary in the coal mine,” sensitive to the trends of climate change impacts and the costly risks they impose.

In other words, where scientists and educators have had limited success in convincing the public and politicians of the urgency of climate change, insurance companies may step into the breach.

Steroids and climate change

Dr. Jane Lubchenco, an environmental scientist who oversaw the National Oceanic & Atmospheric Administration from 2009 to 2013, offers a clever analogy to convince people of the connection between the destruction wrought by a single hurricane and climate change. It involves steroids and baseball.

Her analogy goes like this. If a baseball player takes steroids, it’s hard to connect one particular home run to his drug use. But if his total number of home runs and batting averages increase dramatically, the connection becomes apparent.

“In similar fashion, what we are seeing on Earth today is weather on steroids,” Lubchenco explains. “We are seeing more, longer lasting heat waves, more intense storms, more droughts and more floods. Those patterns are what we expect with climate change.”

And those weather patterns come with a cost.

Someone has to pay for these damages

In 2017, for example, Hurricanes Harvey, Irma and Maria and other natural disasters like Mexican earthquakes and California wildfires caused economic losses of $330bn, almost double the inflation-adjusted annual average of $170bn over the prior 10 years.

Estimated costs from Hurricane Florence, which struck the Carolinas in September, range as high as $170bn, which would make Florence the costliest storm ever to hit the U.S.

More broadly, total economic losses from wildfires in the U.S. in 2017 – the third-hottest year on record, behind 2016 and 2015 – were four times higher than the average of the preceding 16 years and losses from other severe storms were 60 per cent higher.

Unfortunately, convincing politicians, business leaders and the public that these costs are the result of increased climate change risk hasn’t been easy. It’s a challenge that has been a major focus of my work for almost 10 years.

In 2013, I helped convene a series of executive forums to introduce a wide range of business executives to the 30 petabytes – 30,000,000,000,000,000 bytes – of weather and climate data in the National Climatic Data Center’s possession.

While the hope was that they would see the value of such vast amounts of data in managing climate risk, we found limited interest, leaving us to wonder if we were too early and whether our target was too broad.

This led me and others to realise that we should be more focused on insurance companies, society’s first line of defense in absorbing these costs, making their industry arguably the one most directly affected by climate change.

For example, the insurance industry paid out a record $135bn from natural catastrophes in 2017, almost three times higher than the annual average of $49bn. That’s not to mention the uninsured losses that were also incurred – uninsured losses from 2012’s Hurricane Sandy were 50 per cent of the total $65bn in losses, a staggering tab picked up by individual citizens and the taxpayer.

Insurers will eventually adjust to this emerging reality. And with it will come changes in our economy, including higher costs that will affect everyone’s pocketbook.

Our ability to drive a car, buy a house, build an office building, run a manufacturing plant and enter into contracts are all supported by insurance. Without it, a great deal of these activities would become more expensive or even stop.

And so, as the insurance sector adjusts to factor the growing risks of climate change in coverage and premiums, it will become a powerful lever for pushing society and the economy to become more resilient to the changes that climate change is expected to bring.

A whole new ballgame

While reinsurance companies – which basically insure the insurers – have been studying increasing climate-related risks for decades, traditional insurance companies haven’t.

There are two primary reasons for this. The first is that they’ve been able to pass on the most catastrophic or uncertain risks to reinsurers and other investors. The second is that insurers are overconfident that they’ll be able to quickly adjust their policies on a year-to-year basis to manage climate risks. Hence a 2012 study found that only 12 per cent of insurance companies had a comprehensive climate change strategy.


This is starting to change. A 2018 study found that 38 per cent of insurance companies now consider climate change to be a core business issue, a figure that will likely continue to grow.

In August of this year, the International Association of Insurance Supervisors, a respected international standard-setting body for the insurance sector, published a report outlining climate risk a strategic threat for the insurance sector. It cautioned against relying on annual adjustments to manage climate risks as physical risks can change suddenly and in “non-linear ways.”

Recognising this threat, many insurers are throwing out decades of outdated weather actuarial data and hiring teams of in-house climatologists, computer scientists and statisticians to redesign their risk models.

Ultimately they are examining if they need to change their coverage and raise their rates. This is where the impact will be felt, compelling citizens, businesses and governments to perk up and pay attention.

And yet it changes

When Galileo Galilei upset dominant beliefs in the 16th century by asserting that the Earth revolved around the sun and was forced to recant, he is purported to have replied “Eppur si muove”: “And yet, it moves.”

Today, although many dispute that the climate is changing, one might offer a similar retort: “And yet it changes.”

As humans persist in our emission of greenhouse gases, the climate continues to change, weather patterns become more unstable, damages due to hurricanes, wildfires, droughts and floods increase, and insurance payouts grow.

In response, insurances premiums will increase and coverage will decrease. With any luck, that will lead us to build more resiliently, curb our greenhouse gas emissions and ultimately see increased storm severity for what it is: a consequence of climate change.

The Conversation

Andrew J. Hoffman, Holcim (US) Professor at the Ross School of Business and School of Environment and Sustainability, University of Michigan.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 
 
 
 

To see how a city embraces remote work, look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”

Katie Bishop is a freelance writer based in Oxford.