This is why reinsurers focus so intensely on climate change. Take a glance at the websites of big ones like Swiss Re and Munich Re and you get a sense of how central this is to their calculations – a concern that has spread to property insurers who are starting to hire climate consultants. Even more than market volatility, climate is their biggest headache. ‘You won’t meet a single insurance or reinsurance CEO who doesn’t believe in climate change,’ the insurance investor and former Lombard Insurance CEO James Orford told me. ‘They see it in the numbers – a combination of more extreme, less predictable events, combined with big losses of sums insured. All the modelling suggests these are uninsurable risks.’
Insurance is basically a form of gambling and the companies are the house, calculating the odds and taking a cut. Nothing is uninsurable, you just need to set the odds appropriately, perhaps it becomes very expensive, or gasp, unprofitable. Prices are going up because climate change is changing the odds. The problems arise when it is profitable to increase prices further than necessary and to deny claims whenever possible, and people have rightly become distrustful.
There is a solid case for taking profit out of the equation and nationalizing.