Dire Economic Consequences of Global Warming for Insurers, Taxpayers, the Nation
Washington, DC - April 19th, 2007 -- Senate Homeland Security and Governmental Affairs Chairman Joe Lieberman, ID-Conn., and Ranking Member Susan Collins, R-Me., Thursday cautioned federal insurance providers to consider the impact of global warming when assessing property risk or face billions of dollars in possible damage claims - at a cost to the American taxpayer and the national debt.
At a hearing entitled “Dangerous Exposure: The Impact of Global Warming on Private and Federal Insurance, ” the Senators examined the practices of two taxpayer funded programs, the National Flood Insurance Program, run by the Federal Emergency Management Agency (FEMA), within the Department of Homeland Security, and the Federal Crop Insurance Corporation, run by the U.S. Department of Agriculture. According to a report released at the hearing by the Government Accountability Office, both insurance programs have not developed a long-term strategy to deal with the potentially devastating and protracted effects of global climate change, putting them far behind private insurers that have incorporated these risks into their overall assessments.
Lieberman noted that FEMA and USDA programs paid one-quarter of the $320 billion that public and private insurers together paid on weather-related claims in the U.S. in the last 25 years. “These two federal insurance programs could see their losses grow by many billions of dollars in the coming decades. In the absence of careful planning and mitigation, the impact of global warming on these two programs could substantially increase the annual budget imbalance and the overall deficit of our federal government,” he said.
As storms intensify, the economic damage they impose grows exponentially, according to the GAO report, which found that federal flood insurance programs’ exposure is at $1 trillion as a result of droughts, hurricanes and flooding.
Lieberman called on FEMA and USDA to produce a report on how they plan on examining the long-term implications of climate change on their organizations, and asked for a deadline on when they would be prepared to report to Congress with their analysis.
“The federal government has grown markedly more exposed to weather-related losses since 1980. We’re looking at more floods, droughts, pestilence, fires and storms – all carrying dire economic consequences,” Lieberman said. “We have reached a state of scientific consensus on global warming, and it would be irresponsible not to have [The National Flood Insurance Program and the Federal Crop Insurance Corporation] make an analysis and report to Congress.”
“The rapidly mounting evidence of climate change depicts a threat that extends even beyond vital environmental and social concerns. Global warming also threatens to burden consumers and taxpayers with billions of dollars in added costs as insured losses from floods and storms cause increases in federal spending and insurance premiums,” said Senator Collins.
The Committee heard testimony from John B. Stephenson, Director of Natural Resources and Environment at GAO; Eldon Gould, Administrator of the Risk Management Agency at USDA; Michael Buckley, Deputy Assistant Administrator for Mitigation at FEMA; and Andrew Castaldi, the head of Catastrophe and Perils, Americas Division, for the Swiss Re Corporation.
Below is a link to the GAO’s report entitled, “Financial Risks to Federal and Private Insurers in Coming Decades Are Potentially Significant”: http://www.gao.gov/new.items/d07760t.pdf