America – and the world we live in – often feels like a tale of two realities, doesn’t it? I, again, had that feeling when I looked through two climate insurance reports this week, which painted a very different picture of where the United States (and the world) stands on climate resilience. The takeaway: Depending on the socio-economic reality you face, climate disasters are either catastrophic or a manageable risk.
The first report from Aon insurance broker, has shown that American companies are among the best insured against climatic catastrophes. Although Hurricane Ian last year was the world’s second costliest weather disaster in 21st century, with losses of $99 billion, businesses and citizens were not as badly affected as they might have been: about half of the losses from Hurricane Ian and about two-thirds of the losses global disasters caused by climatic disasters in the United States, were covered.
The second report of the ESG initiative of Ceres and Wharton, had a title almost the opposite. “A new report shows that the US insurance industry provides inadequate coverage for weather-related catastrophes,” it read. “U.S. weather-related catastrophe insurance is often inaccessible, unaffordable, or fails to meet the needs of certain populations,” he continued. The same Hurricane Ian was mentioned to me as an example of this problematic reality.
So what’s up? I decided to call the two authors of the report and get their opinion. And it turns out that both are right. It just depends on where you are on the socio-economic scale. This is further evidence of the bifurcated reality we live in where the situation of haves and have-nots is huge and growing.
First, Dan Dick and Michal Lörinc at Aon told me how their company came to a rather bullish view of the US market. Compared to other countries, he said, U.S. companies are much more “mature” in their weather insurance. Many companies are insuring against weather risks and reinsurers are stepping in to absorb the shocks that occur when a billion dollar loss occurs, which is increasingly common.
In other regions, markets for weather catastrophe insurance and reinsurance are less developed. Only 13% of the economic losses of the European summer milking were covered by insurance, for example. In Asia, the situation is even more dramatic. In China and Pakistan, only around 1-2% of flood damage was insured.
At Ceres and Wharton, however, such optimistic findings would have raised eyebrows. When Hurricane Ian hit, Ceres CEO Steven Rothstein told me, many families, “especially brown and black families,” found they were uninsured, under- insured or thought they were insured, but in fact were not. The fact that half of the losses were covered made no difference to the half that was not covered.
Events like Ian and other extreme weather events prompted Ceres to write its own report and lobby industry and government to provide better solutions. “The number of affected families is growing,” Rothstein told me. “They are not well served by the insurance industry as a whole. We can do better and we must do better. »
So where does this leave us? On the one hand, businesses and wealthy individuals seem to have many levers necessary to limit the harmful economic impact of climatic disasters. They take out insurance and are reimbursed. As the market is as mature as it is, reinsurers step in when a major catastrophe occurs, and overall the market is functioning and resilient.
On the other hand, many people living in the same country, or in less developed economies, face a completely different reality. Often they don’t have as little as $400 on hand in case emergency expenses are needed, let alone the financial capacity to insure against disasters. When a climatic event occurs, as is increasingly the case, they will certainly suffer all the consequences.
Here’s the moral of the story: Many readers of this newsletter probably fall into the first category. You live in New York, Washington, the Bay Area, London or other affluent metropolitan cities. You work for Fortune 500 or other global companies and lead them responsibly to be more resilient and adaptive to our changing climate.
But it’s you — us — that nonprofits like Ceres are targeting with their research and lobbying. They suggest that unless the system changes, and unless we act as agents of that change, the reality for many people in the United States will be no different from that of the vast majority in Pakistan, India or other developing countries where climatic disasters are increasingly devastating.
More news below.
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Is OnlyFans a fairer company than YouTube or Apple?
“OnlyFans has become a runaway success through adult content,” writes my colleague Emma Hinchliffe in a Fortune magazine story this week. But now CEO Amrapali Gan “wants to diversify his image without losing his edge”. What caught my eye, however, was the realization that OnlyFans allows its creators to keep more of their revenue than, say, YouTube or Apple. While OnlyFans takes 20% of the revenue generated on their platform, Apple keeps 30% and YouTube up to 45%. Is it fair to weigh this more generous revenue sharing model against the “morality” of the content? I would love to hear your thoughts.
PepsiCo on the climate: PR or pioneer?
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One of Azevedo’s colleagues, CSO Jim Andrew, told me about the company’s efforts to avoid plastic when promoting its SodaStream beverages. PepsiCo is also starting to use recycled PET bottles. But alongside rival Coca-Cola, PepsiCo has been ranked the world’s top plastic polluter for four consecutive years. Just like PepsiCo’s climate pledge PR or pioneering effort?