Weathering the Crisis: How American Insurers Planned for Climate Change, 2012-2023

• In Event: Organizational Responses to Crisis

Abstract

How did the American insurance industry respond to the growing threat of climate change? Drawing on a variety of data sources, we document how the industry recognized the potential for climate change to disrupt its investments and underwriting, and how the industry planned to respond. We show that insurers were confident in their ability to quantify increased risks and then either raise rates or exit risky geographies and thus maintain profitability. This strategy was plausible given the short-term nature of most insurance contracts: homeowners might have 30-year mortgages, but home insurance contracts are typically one year. At the same time, insurers continued to underwrite and invest in fossil fuel companies and engaged very little with climate policy (in favor or against). In sum, insurers predicted that they would be able to weather climate change even as property owners might face an insurance affordability and availability crisis. Insurers then enacted this playbook starting in the late 2010s and early 2020s as predicted climate impacts began to manifest. This analysis contradicts predictions that insurers should be natural supporters of climate change policy and suggests skepticism vis a vis accounts that see insurance as a key site of neoliberal governance of climate change through price signals.

Authors

• Edoardo Di Vincenzo, Cornell University

• Daniel Hirschman, Cornell University