There are two types of man made climate change. We’re all familiar with one – the impact of human activities on the climate due to rising carbon levels.

The second though is often overlooked. It’s how humans take actions that make the effect of a warmer climate worse.

When it comes to the impact of climate on insurance losses, most of the discussion centers around the first topic – are we having more hurricanes? more wildfires? more floods? In other words, how much higher is frequency?

But the severity of loss is often a function of that second issue. Do people act in ways that increase, rather than decrease, their exposure to climate loss? If so, what can we do to reduce this man made role on the human impact of climate disasters?

Understanding Attribution

Before I dive in, I think it’s important to define some terms first.

First, most natural catastrophes are not due to climate change. If the climate were the same as 100 years ago, there would still be lots of hurricanes and tornadoes and wildfires.

Climate change is linked to the increase in natural disasters. People are too quick to attribute every bad event to climate change.

If a quick numerical example helps, let’s say 1000 people per year died of a disease. If a new drug had a side effect that caused that disease in some people and 1050 died the next year, we would say the drug led to 50 deaths, not 1050.

We can completely remedy climate change and there will still be large natural disasters. More and more people will suffer from them than in the past because of these secondary man made actions such as moving to risky areas.

While it is difficult to separate how much of increased catastrophe losses are due to increased emissions creating more weather events versus people choosing to voluntarily increase their exposure to disasters, they are both factors and, as a society, we should stop overlooking the latter.

Do As I Say, Not As I Do

One of the greatest causes of this voluntary man made climate impact is saying one thing and doing another.

The Earth’s climate is always changing. The cause and magnitude may be different this time but our resources to adapt are greater too.

In the past, when the climate changed people adapted and moved to more hospitable environments. Prehistoric people didn’t have the technology we did, but they realized when crops stopped growing, it was time to move to a new area and start over.

Yet we, with all our modern resources, keep moving to the most dangerous parts of the country contradicting all our knowledge about the climate risk!

As a society, we shame famous climate activists who drive SUVs or own private jets, but we don’t look twice at people who move to Miami or leave LA to move to the edge of the forest.

Yet, the latter choices are conscious acts to increase society’s exposure to climate damage. People are running toward the danger rather than away from it!

Our fastest growing cities are Phoenix and Las Vegas – actual deserts! Throughout history, people only lived in the desert if there was no place else to go. Why are we encouraging people to move there?

Yet our politicians do nothing to dissuade this. Most here know about Federal flood insurance that lets people continually rebuild on the same exposed areas.

California has forced people into the forest by making housing development in SF and LA too expensive. Florida and Texas offer tax benefits to those who move in.

If government was serious about reducing the risk of climate losses, it would either create incentives to reduce migration to the coasts or increase required mitigation to better protect those who do move.

Lessons From Great Fires

In some ways, our current era echoes that of the 1600s & 1700s where people moved to cities and built wood homes right next to each other. This led to an accumulation of risk. This was also a man made error.

As many of you know, this heightened fire risk led to the rapid development of the property insurance industry. It also led to many deaths and large financial loss when contagious fires broke out.

Was the solution to increased fire risk to tell people they needed to stop heating their homes? Or that they should replace their wood homes with safer mud huts?

Maybe there were some people who did advocate for that. I don’t know. I do know that the eventual solution was mitigation.

Fire departments were created to contain burns. People were taught how to better take care of their property and to make sure flames were extinguished at night. Cities began requiring new buildings to use materials like stone instead of wood.

Today, we hardly think of fire as a risk and certainly not as a risk that could destroy a large city overnight. Maybe there is something to learn here?

Mitigation and Regulation

The clear answer is there needs to be greater focus on mitigation. We can all think of the obvious answers – elevate the beach house, require stronger roofs, mandate fire resistant materials, etc.

However, to truly make an impact, there needs to be capacity limits on population size in dangerous areas. We have limits on how many people can be in the elevator or a movie theater, but no such limits on homes on the beach.

It’s hard to understand how California can decide to phase out combustion vehicles but let more and more people move to the edge of the forest.

On the topic of wildfire, if climate change means that, for a given amount of brush, a fire is more likely to break out then the obvious tool available is to reduce the amount of brush through more frequent controlled burns.

The idea that because the climate is warmer we must accept defeat and resign ourselves to more fires is ridiculous. Where is the initiative that we used to tame fire as a threat a few hundred years ago?

Hurricanes and tornadoes are harder to prevent but there are ways to avoid being exposed. Improvements in early warning systems have reduced deaths, but you can’t put your house on wheels so they don’t avoid property loss without investing in stronger roofs and floodproofing.

The only two realistic choices for wind are either a) limit population or b) mandate stronger homes and buildings. It’s really that simple. You can get a near bulletproof roof if you’re willing to pay for it.

Japan Leads The Way

While earthquakes may not be caused by climate, they are a gigantic threat, particularly in coastal areas. Japan is obviously a very heavily populated area with about 10X the population density of the US.

It is clearly very prone to earthquakes. How do they manage to keep their population safe?

Since they can’t blame climate change for earthquakes, they decided to do something about it instead. Japan has the strongest building codes in the world and can quake proof buildings.

Sure, it’s expensive and Japan has arguably the most expensive real estate in the world. Yet, that hasn’t stopped them from innovating to keep the population safe.

If Japan can require mitigation and still find ways to build, why can’t San Francisco?

Insurance Pricing And Availability

Returning to the topic of inconsistent behavior, on one hand, insurance regulators understand increased frequency of climate events paired with larger populations in affected areas leads to higher insurance losses.

On the other, they often don’t want to raise prices to avoid upsetting consumers. These beliefs are not compatible.

If everyone is in agreement that a warmer climate leads to more property losses, then it is a natural consequence insurance will cost more. If you don’t like that, see the part above about how nobody is forcing you to run towards danger.

If the most impacted states limit insurance prices, then insurers will eventually decide not to do business in their states. This is what we are seeing now in Florida and California.

The best way to lower prices is to allow more capacity into the market and to allow insurers to charge less for those who do more preventive mitigation.

Finding Solutions

While we are dealing with a new form of increased natural disaster risk, we are in many ways repeating history. Countless societies have had horrific losses due to fires, quakes, or hurricanes. Prior generations realized that when risk rose, new tools were needed to manage it and be better prepared for next time.

Insurance was one of those tools and should be seen as part of the solution rather than a problem.

We should be focused on creating better technologies to reduce risk. Why are there subsidies for solar panels but not for better protecting the roof they go on?

Investing in protection doesn’t just reduce the damage from increased frequency, it reduces the damage from the base level of disasters too.

Japan has shown it is still possible to take action. We just have to have the will to do it.

If we take steps to reduce the man made errors, we can reduce the harm from man made climate change and better acclimate while we look for better long term solutions to the root cause.

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