Warming Impacts How Global Warming Impacts Commercial Insurers

People assume that every person on earth is in danger due to global warming, but what companies and industries have the greatest financial risk? And, which industry will have to assume the risk that others disregarded? Of course, the obvious answer is the insurance industry. Insurance is the gamble by a financier (or underwriter) against the risks that endanger any purchase or venture (Cummins & Venard, 2008). Understanding what global warming threats entail and how they can adversely affect the insurance industry's ability to provide the funds to secure risk is a crucial present and future occupation.

The insurance industry may be the most significant deterrent against the costs that are to be incurred by the possible deleterious environmental effects of global warming (Litan, 2006). However, because of the money to be made and the costs associated others will incur some of the cost also (Dorman, Duchen & Markus, 1999; Jagers & Stripple, 2003). This investigation will, in part, determine what the role of insurance providers will be in the event of a global warming crisis, and whether they are better equipped to deal with these events or if it could be bettered assigned to a global government structure (Jagers & Stripple, 2003), or some conglomerate of commercial insurers, "investment bankers, Internet companies offering financial services, and specialist risk consultants" (Dorman, Duchen & Markus, 1999).

The main idea behind the research is that studies have investigated all manner of individuals, industries and nations that could be intimately involved with some aspect of global warming, but how the associated risk from actions that either result in global warming or are possibly as a result of global warming has been under-researched. People who build houses too close to a tidal region are risk averse because they can buy subsidized by the government (Litan, 2006). People have sued the United States government because "plaintiffs alleged that the oil and gas industry, naming specific companies, had caused all the property damage in Mississippi, because their operations resulted in emissions of greenhouse gases and caused global warming, which caused the hurricane winds to be stronger and the storm surge to be greater than it otherwise would have (Geary, 2007). These possible elements of global warming have not been examined.

A working title is:

The risks that individuals take considering the forecasts associated with global warming

This study will use data from insurers and different forecasters associated with global warming to determine how risky are the decisions people make regarding home placement, business ventures, and others.

Academic Context

The literature suggests that studies have been conducted assessing the actions of individuals even as climate signs increase the likelihood that there could be catastrophic global warming events. The sea level is increasing every year, and has been for at least the past two decades (Stone, 1992). The world food supply is presently in danger because "the uncontrollable elements of the climate can make or break even the most carefully controlled farming operation (Reilly, 2002). The incidence of hurricanes, and there intensity is increasing (Mank, 2005); individuals are building on flood plains and coastal regions at a greater rate (Fershee, 2009); and, health concerns have become one of the unsung elements of global warming (Friedman, 2005).

This study will take into account all of the different risks that are involved with global warming and now people are currently reacting to them. The study will also need to assess in some small detail the fact that there are many reputable scientists who believe that the "direst predictions for global warming are based on doubtful logic and some faulty assumptions" (EBF, 2006). This greatly plays into how adjustors will set insurance rates. If it is not a certainty that warming is a fact, then insurers will be hard pressed, if forced to back up their premium rates in court, to defend themselves (Allen, Seaman & Delascio, 2009).

The risks that people will take are also regulated by the cost of the investment, and whether they can be insured for it (Burt, Carlson, Kucera & Massie, 2009). People are more risk averse when they have a large investment, unless they know that either an insurance company or the government will defray the cost of the investment if a disaster does occur (Burt, Carlson, Kucera & Massie, 2009; Pompe & Rinehart, 2008).

However, insurers may discontinue sales of...

These companies are attempting to avoid the bankruptcy that may occur due to global warming, and precedent has already shown that "the insured's bankruptcy or insolvency was not to reduce the insurer's obligation (Manilof, Mayerson & Stempel, 2006). Also, governments who back many of the risky ventures for their citizens may take a second look at what is happening and reassess what they are willing to fund (Moeller, 2006). The factors that are involved in this assessment may have to be reduced as the number of variables increases. To make this a viable study, one that can be effectively researched to some degree of certainty, the scope must be small enough. The research question itself may have to be changed, and the project narrowed. But that can be determined by the availability of data and previously conducted research. The study may be narrowed to include only one or two of the variables that present themselves.
Research Objectives

Objective #1

How will people pay for the damage that they incur as a result of a catastrophic global warming scenario. If the worst happens, people will be forced to move farther inland. These relocations could take place in a scenario that lasts many years, or it could happen quickly. The time frame of the event and the availability of resources will determine what happens.

Objective #2

How risk averse is the average person. This part of the research could be conducted using a random sample of individuals who take a survey assessing their risk aversion. The questionnaire would ask the person about all areas of their life and determine if people who are adventurous in one area are risk averse in another. This will show how people think about risk in general.

Objective #3

How much stock do people place in the forecasts of global warming, and how do they think that they will be affected. This data can either be gleaned from surveys, or it can be taken from data that has already been collected by various sources.

Research Methods

Research Strategy

The main strategy here will be surveys. Some of the research will be gathered from sources that already contain needed research data. It may be possible to gather all of the necessary research from alternate sources that have collected like data, and compile it. But, this would entail gathering from very recent sources to make the research viable.

Data Gathering

Data required for this research would be from either individuals who have agreed to take a survey (which would require a human subjects review and approval), from a U.S. survey that has data that meets the requirements of the research or it could be gleaned from other sources. The data requirements would require that a specific document be drawn up which would reflect what exactly is to be gathered, from whom, and for what purpose. These data requirements would have to be followed to the letter after they are approved because they are the basis for the safety of the individuals from whom the data is gathered. Data recording would require the use statistical analysis to determine the severity of the risk factors involved and how risk averse the average person is. Also, it may be valuable to do separate assessments of the risk aversion of certain demographics within the general population. Insurers already use such data when they rate people for specific premiums, so this data should not be difficult to gather.

Access to data would be determined by what type is used. Primary sources would be people who have agreed to take a survey and answer questions regarding risk aversion or adventurousness. There are instruments that have been previously used to make these determinations, and they would be tailored for the specific research.

References

Allen, R.D., Seaman, S.M., & Delascio., 2009. Emerging issues: Global warming claims and coverage issues. Defense Counsel Journal, 76(1). 12-37.

Bertagna, B.R., 2006. "Standing" up for the environment: The ability of plaintiffs to establish legal standing to redress injuries caused by global warming. Brigham Young University Law Review, 2006(2). 415-446.

Burt, L., Carlson, C., Kucera, J., & Massie, J., 2009. Florida homeowners insurance: How big Is the availability problem and Is there a fair solution?. Risk Management and Insurance Review, 12(2). 183-196.

Cummins, J.D., & Venard, B., 2008. Insurance market dynamics: Between global developments and local contingencies. Risk Management and Insurance Review, 11(2). 295-307.

Derrig, R.A., Fishman, J.S., Grace, M., & Schmit, J., 2008. Catastrophe management in a changing world: The case of hurricanes. Risk Management and Insurance Review, 11(2). 269-279.

Doman, A., Duchen, T., & Markus, M., 1999. Brokers vs. insurers. The McKinsey Quarterly, 26-34.

EBF., 2006. Climate change: Threat or opportunity?.…