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The insurance industry has been behind the global-warming-weather fraud since the 1970s

Your home insurance premiums — and the insurance industry’s profits — depend largely on the industry’s skill in making two types of investments: in the stock market and in marketing that scares the bejesus out of its customers.

The insurance industry, like most in these turbulent times, hasn’t done well of late in picking blockbuster stocks. But it has done brilliantly in picking blockbuster scares — all related to global warming. The upshot? The insurance industry wants more money to cover its poor stock picks. And more money again to cover future global warming risks. With the government’s blessing, insurers will now jack up your home insurance premiums by 10% to 15% in the coming year.

The insurance industry earned every dollar that it makes from global warming — its sharp-eyed marketers spotted the potential before anyone else. In 1973, Munich Re, one of the world’s largest insurers, warned that rising temperatures could result in receding glaciers and polar caps, shrinking lakes, and rising ocean temperatures, with carbon dioxide as the culprit.

“We wish to enlarge on this complex of problems in greater detail, especially as — as far we know — its conceivable impact on the long-range risk trend has hardly been examined to date,” Munich Re concluded. And enlarge on the problem it did. Munich Re enlisted others in the insurance industry and then methodically and relentlessly made its case to Greenpeace, other environmentalists and other industries that stood to profit.

The result was the greatest environmental scare success in history. By 1979 large numbers of scientists were on board, the World Climate Conference expressing concern that “continued expansion of man’s activities on Earth” may lead to climate change. By 1988, the United Nations’ Intergovernmental Panel on Climate Change’s was born. By 1992, Maurice Strong and Al Gore held the Rio Conference and by 1997, the Kyoto Treaty was a reality.

Canada’s insurance industry also led. One year after Kyoto, the industry founded and has ever since funded the Institute for Catastrophic Loss Reduction, which it installed at the University of Western Ontario. This sciencey-sounding institute, which calls itself “an independent, not-for-profit research institute,” has as its executive director Paul Kovaks, formerly of the Insurance Bureau of Canada, the industry’s lobby group. The institute’s board? Its chair’s day job is president and chief executive of Co-operators Group, while other directors include top dogs at State Farm Canada, Swiss Reinsurance, Lloyd’s Canada and Allstate Canada.

The main work of the Institute for Catastrophic Loss Reduction, naturally enough, involves avoiding catastrophic loss reductions on the balance sheets of Co-operators, State Farm and its other corporate members. The research from this bought-and-paid-for operation has then justified higher insurance rates on the basis “that the frequency and severity of extreme weather events is rising, contributing to an increase in claims and costs.”

Just this week, the institute’s Gordon McBean, also an author for the IPCC’s latest scary report, reiterated this view. “Where we have good data on the observations of the climate, you can show that there is an increased frequency of high-precipitation events,” McBean told CBC, adding that “analysis done by scientists shows that that change is related directly to the greenhouse gas — increasing — concentrations. In other words, it’s a part of the human-caused climate change.”

More scary stuff appears on the website of the Insurance Bureau of Canada, which blames climate change for extreme weather events that in turn lead to higher industry payouts and thus higher rates. “Protect Yourself From the Effects of Climate Change” one headline states, asking: “Are you disaster ready?” Readers then have a choice of seven climate-change threats to click on — hurricanes, severe storms, winter storms, wildfire and the like. The top climate change scare that the Insurance Bureau lists, bizarrely, is “Earthquakes,” which not even the Institute for Catastrophic Loss Reduction blames on climate change.

Canadian insurers like TD Insurance claim “it’s a proven fact” that climate change is driving rate increases. This is true, not because the science justifies rate increases but because government regulators and many in the public accept the claim as valid. The actual facts, from those not associated with the IPCC, say quite the opposite, and emphatically so.

Last year, the American Meteorological Society published a peer-reviewed study that investigated insurance claims from extreme weather events. The study’s author, Laurens M. Bouwer of the Institute for Environmental Studies at Vrije Universiteit in The Netherlands, examined 22 previous disaster loss studies involving extreme-weather-related natural hazards such as tropical cyclones, as well as small-scale weather events such as wildfires and hailstorms.

The conclusion: “The studies show no trends in losses … that could be attributed to anthropogenic climate change. Therefore it can be concluded that anthropogenic climate change so far has not had a significant impact on losses from natural disasters.”

In the face of overwhelming criticism of its climate change claims, even the IPCC has begun to backtrack. Its latest study uses a definition of climate change that concedes humans may contribute little or nothing to climate change: “Climate change may be due to natural internal processes or external forcings, or to persistent anthropogenic changes in the composition of the atmosphere or in land use.”

This is a far cry from the more common scary definition that blames humans for “a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods.”

The difference between the two definitions is not academic. If the insurance industry admitted that it has no reason to believe that anthropogenic climate change will drive future extreme events, we would all have extra money in our pockets.

Financial Post, 19 November 2011