Vicious hurricanes in the southeast of the United States. Mass floods in Ontario and Quebec. Forest fires in Los Angeles.
What these events have in common, in addition to the fact that climate change has made them more extreme, they are hitting insurance companies.
Preliminary estimates suggest that the fires that devastated angels, and the most expensive forest fires in the history of California, could put the insurers in the hook for Between $ 28 billion and $ 45 billion of the USA ($ 40 billion to $ 65 billion CDN).
Meanwhile, the Canada Insurance Office recently reported that as a result of events such as the Jasper forest fire and floods in eastern Canada, 2024 Establish an insurance payment record in Canada: $ 8.55 billion.
This will inevitably lead to insurers to increase rates as they try to manage the broader risk. But as premiums increase and some regions become un insurance, it could have a waterfall effect that could lead to A financial crisisGary Yohe, professor at the Huffington Emeritus Foundation of Economics and Environment at Wesleyana University in Connecticut says.
“What is happening now is that the really, very dark [climate events] They are simply catastrophic and everything in one place, that happen at the same time, “said Yohe.
In terms of insurance, he said, “creates a social problem, not just an individual problem.”
As the southern California receives a very necessary rain, a new analysis suggests that the conditions that led to the January forest fires were 35 percent more likely due to the climate change fed by humans. And the more likely these fires become, the more expensive safe one you will get for everyone.
Los Angeles fires are a good illustration of this. The flames that extended through the areas of Pacific Palisades and Altadena burned around 15,000 hectares, killing 29 people and destroying approximately 16,000 homes.
As Yohe points out, many of the properties will no longer be worth as much as the director of the owner’s mortgage. Some people will move away from their mortgage and stop paying the bank.
But it doesn’t end there. Much of that debt is packaged and sold to investors.
“That extends. That not only happens in the local banks of California,” said Yohe. “They are part of national chains. Large banks make derivative packages and sell them to banks around the world.”
The financial impact of the forest fires of Los Angeles seems contained so far. But Yohe argues that a similar climate disaster could quickly lead to a situation that resembles the high -risk mortgage crisis 2007/2008, which led to a global recession and the loss of millions of jobs and companies.
Evidence of non -climate -related mortgage breaches
Not many people have entertained this idea, but as an economist, Yohe has been thinking about the greatest impacts of climate change for a while.
In 1982, he participated in a preliminary study of the National Academy of Sciences of the United States on global warming and the potential to become a significant economic vector.
“There were probably five economists in the world who knew about climate change at that time,” Yohe joked.
Fast advance several decades. A report earlier this month of the Institute and the Faculty of Actuaries in the United Kingdom said that unless political leaders take greater measures to reduce carbon emissions, GDP of The global economy could be cut in half Between 2070 and 2090 due to climatic clashes.
Dave Jones, director of the Climate Risk Initiative at the Center for Law, Energy and Environment of the UC Berkeley Law School, believes that a financial collapse derived from insurance losses is clearly possible.
“In the United States, you must have insurance if you have a mortgage. And if your insurance price is going up, as it has been, that makes it more and more difficult to pay a mortgage,” said Jones, former insurance commissioner of the State of California.
“We are beginning to see some evidence that people are breaking their mortgage, not only in California, but in other parts of the United States, as these insurance prices increase.”
A new report by First Street, an organization based in the United States that measures climate risk, says that the extreme climate could eliminate $ 1.47 billion in the real estate value of the USA. In the next 30 years.
Some areas of the United States and Canada are so vulnerable to climatic impacts that are increasingly insured. In recent years, several important insurance companies have retired from California, Florida and LouisianaFor example, due to its susceptibility to a variety of environmental risks.
North of the border, Around 1.5 million homes in Canada are now not eligible for flood insuranceAccording to Craig Stewart, vice president of climate change and federal problems for the Canada Insurance Office.
‘Severe convective storms’
As Stewart recently told the CBC radio program What the devilFloods include most insurance payments in Canada, representing around $ 3.7 billion in 2024.
But the pure unpredictability of global warming is leading to strange occurrences.
The most expensive event in Canada last year was A 20 -minute hailstorm near Calgary That resulted in 70,000 claims.
“Obader cars, damaged houses: it reached around $ 2.8 billion for that event,” Stewart said.
Jones said that “climate change is creating completely new things to kill us, hurting us, damaging our properties and making insurance not available.”
He specifically cited “severe convective storms”, which are basically atmospheric rivers that appear on a region and throw large volumes of rain for long periods of time.
“If I had asked insurance professionals 20 years ago what is a severe convective storm, they would have looked completely,” Jones said. “Sometimes it is hail, sometimes it is a strong rain, sometimes it is wind.”
He says that severe convective storms represented more than 50 percent of the losses insured in the United States last year.
Yohe points out that until about 15 years ago, insurance companies in the United States were regulated to determine their premiums based on actuarial data in recent history.
“But only ordinary climate change was beginning to tell a story that the last 10 years are a very bad predictor of the next 10 years in certain circumstances, such as property on the coast,” he said.
Finally, regulators in several states, led by Connecticut, have allowed insurers to use possible future projections, such as the increase in sea level, to establish premiums.
Reinsurance, political factors
Another reason why localized disasters can have a broader economic impact is reinsurance, which is what insurance companies buy to minimize their responsibility in case of an important catastrophe.
Large reinsurance companies are multinational corporations, and when they have to pay disasters worldwide, they end up raising premiums for insurers, and that is inevitably reduced to consumers, says Yohe.
As a result, Canadian owners can feel the effects of the forest fires of Los Angeles.
Yohe says that politics, particularly in the United States at this time, could exacerbate the problem of insurance losses. Following Los Angeles’ fires, President Donald Trump criticized California without foundation for poor water management and threatened to retain disaster funds unless the State agreed some unrelated policy changes.
The then President Joe Biden did not put such conditions in federal aid when Hurricane Helene caused damage last September last September in North Carolina, which usually vote for a Republican president.
“This is not a political statement: insurance works when it extends widely. The broader, the better,” Yohe said. “Putting limitations on the Federal Government’s contribution to recovery is an act in the wrong direction. [the recovery] Everything in the hands of states is an act in the wrong direction. “
He sees federal funds as an insurance policy itself.
“People who live in Connecticut, not happy but not reluctant, know that much of their tax money that goes to the federal government will go to North Carolina. And that is good.”
