The Insurance Industry and Climate Change

In the past, I’ve taken the insurance industry’s recognition of the economic threat of greenhouse climate change as a sort of free market signal. My reasoning was that people who actually have an economic stake view the threat as real.

But in a couple of posts recently, Roger Pielke Jr. has argued that the insurance industry essentially has an economic motive to inflate the perception of risk:

It seems like pointing out the obvious that the reinsurance industry has a powerful vested interest in charging the highest rates that the market will bear for its products. And the prospect of more disasters means a basis for charging higher rates. Thus, for the moment setting aside whether or not recent disasters are caused by climate change, it seems pretty clear that when the reinsurance industry say that disasters will get worse in the future, they have a clear conflict in interest.