Posts Tagged ‘climate change; insurance’

Climate Change Effects and Insurance — Berkshire Hathaway Should Be Worried

May 6th, 2016

Forest Fire in Fort McMurray, AB, May 2016  By DarrenRD (straigntened and enhanced by CoolCanuck) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

According to a report on Green Tech Media, shareholders of Berkshire Hathaway Insurance have voted to ignore climate risks. Apparently Mr. Buffett “doesn’t think climate change creates serious risks for Berkshire’s insurance business.” http://www.greentechmedia.com/articles/read/berkshire-hathaway-shareholders-vote-to-ignore-climate-risks

Hmm, let’s take a quick look at what’s happening right in Fort McMurray. A massive forest fire has burned through a significant portion of the town leaving tens of thousands homeless and forcing the one of the largest evacuations in Canada’s history. The fires are due to a milder than normal winter combined with less snowfall, fostering an extremely dry spring. In fact, the situation is so bad in northern Alberta and BC, that BC can’t even send its own firefighters to help combat the blaze because they’re worried about their own fire problems.

Most of these properties will be insured — how much is this going to cost the insurers? Recent estimates based on a similar fire which burned through Slave Lake, Alberta in 2011 cost insurers $780 million. Fort McMurray is about ten times the size of Slave Lake. Currently, the estimate is $2.4-4 billion in property damage, however, if the fire keeps raging (and there is no weather relief in sight until tomorrow), it is predicted that the insurance price tag could be as high as $9 billion. To put that in perspective, the Alberta floods in July 2013 cost insurers at least $1.7 billion with more than another $4 billion in uninsured losses — a price tag that now seems paltry by comparison.

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