Surging insurance premiums in regions vulnerable to climate change make sense, and government efforts to hold back those increases won’t work in the long term, Chubb Chief Executive Evan Greenberg said.
U.S. states themselves are driving a crisis of insurance availability by blocking insurers from pricing climate change into policies, Greenberg said on Tuesday in San Diego at the RIMS Riskworld conference, an annual gathering of about 10,000 risk and insurance professionals.
“Climate change is sending price signals. Society will not adjust its behavior to the change of climate just because people talk about it,” Greenberg said. “We’re sending price signals very rationally. That starts driving behaviors.”
Americans and businesses across the country have seen insurance become far more expensive—in some cases nearly impossible to obtain—particularly in areas exposed to wildfire, floods and other damaging weather. Zurich-based Chubb, one of the most important insurers in the U.S., has been on the front lines of the issue.
California and other jurisdictions are trying to “deny” the ability to charge the “right price” for risk, said Greenberg. Several large carriers have stopped writing new policies in California, with the industry blaming state policies that block insurers from using forward-looking climate-risk models to set prices.
The state is working on changing its regulations. California Insurance Commissioner Ricardo Lara didn’t immediately respond to a request for comment.
Insurers have shelled out billions of dollars in recent years as losses from wildfires and other climate-related events have piled up. The industry isn’t ultimately to blame for affordability problems, Greenberg stated.
“We haven’t told people to live in a high-wildfire zone, and we haven’t told them to build magnificent homes in a wildfire zone,” Greenberg said. “I’m willing to insure them if I can charge the right price for the risk.”
In trying to keep rates down, states are effectively attempting to blunt price signals, Greenberg said. But the net effect is that insurers will stop writing policies—leaving taxpayers on the hook for the risk, he added. Florida, California and Louisiana have all seen policyholders flock to state-backed insurance plans that are meant to be a last resort.
Many jurisdictions are adopting policies that aren’t sustainable, Greenberg said.
“The cost of climate change, to state the obvious: Going up,” he said. “This is not a short-term thing that’s going to go away.”