The modern fixation on experts is especially odd in that it seems strongly to prefer those who lack practical experience. Thus Australia’s ABC National Radio says insurance companies don’t know how to set premiums in a hot climate, on the say-so of experts with neither climate expertise nor experience running insurance companies. Which is counterintuitive since insurance companies have skin in the game and either get risk roughly right or go bankrupt and stop being insurance companies. Ah, but you know the trump card here. “Experts say”. As in “Experts doubt industry players and governments have fully come to terms with the issue — and they worry about some of the financial mechanisms insurance companies have put in place to share the risk.” The complaint that governments aren’t all-in on climate change raises serious questions about what specific expertise these people have. But the part that’s hardest to swallow is that they claim to know more about risk than actuaries and others whose livelihoods depend on getting it right.
It will delight some of our readers to know that, whatever else may be going on in this story, it has a Canadian angle. The story quotes Jason Thistlethwaite, who turns out to be an associate professor at the School of Environment, Enterprise and Development at the University of Waterloo where “His research focuses on innovative strategies designed to reduce the economic impacts of extreme weather and climate change.” On the basis of a BA in Political Science, an MA in Political Science and a PhD in Global Governance.
So cue the cries of “You’re not a climate scientist”, right? Wrong. You only get heckled that way if you express skepticism. But what about “You’re not an insurance executive or an actuary”? As Lyndon Johnson supposedly said of the Best and the Brightest that he inherited from John Kennedy, it would have been reassuring if any of them had ever run so much as a corner store. (We cannot find a source for this anecdote but it is the sort of thing LBJ would have said; if anyone knows the source, including whether it was some equally earthy politician on FDR’s Brain Trust, please let us know.)
Instead of conceding the educational benefits of attending the college of hard knocks, Thistlethwaite’s contribution to the story is the usual canard about how companies have short time horizons. As if the whole point of stock markets was not to incorporate the best estimate of a large number of informed and engaged participants about the wisdom of management actions, exactly unlike governments.
“Insurers have a short-term focus and often fail to be proactive in assessing future problems, according to Jason Thistlethwaite, a Canada-based academic and expert on insurance practice. He says while global climate models are forward looking, the actuarial practices used for risk modelling in the insurance industry are not. Put bluntly, insurers still spend most of their time looking in the rear-view mirror.”
Also known as looking at actual data not model projections. What chumps.
To his credit, Thistlethwaite does possess one important piece of economic expertise. He realizes that companies that get it wrong will go broke or get out of markets they don’t understand. The argument for free markets is not that entrepreneurs are infallible or anything close; if they were, they could be employed as central planners. The argument is that consumers make short work of firms that make mistakes and cannot or will not admit it.
So problem solved? Those companies that aren’t proactive in assessing future problems or don’t fully come to terms with the issue go broke and leave the field to those that do? Apparently not. And why?
Because of the famous increase in extreme weather that insurance companies are too dumb to notice even as it drains their wallets and gets them fired. The story quotes another expert, “Karl Mallon, director of science at the organisation Climate Risk” (who is in fact a PhD in Mechanical Engineering, with two BScs in Physics) that “If we see emissions continuing in the current direction, the level of warming continuing in the same direction, and if we continue to see a sort of blind attitude to what’s happening, then our risk will rise to about one in 10 properties”. Sadly the story doesn’t say the risk of what. But as the story had already referred tendentiously to “major climate-related events, such as hurricanes and tornadoes” perhaps Australia is going to start getting those.
In fact Australia does get tornadoes. And it only does not get hurricanes because it is in the southern hemisphere where they go clockwise and are therefore technically cyclones. It gets those, including its most deadly and famous, Cyclone Tracy, and its most destructive one which apparently had no name. Perhaps because Tracy was in 1974 and the destructive one that killed over 400 people in and around Cape Melville and destroyed 100 fishing boats was back in 1899 when Victoria was on the throne and Australian federation was still a work in progress. So they are plainly getting worse.
Other experts agree. For instance “Legal expert Justine Bell-James… believes the growing frequency and predictability of natural disasters will eventually reshape the nature of insurance available to desperate homeowners.” And “Korey Pasch from Queens University, Ontario, believes many insurance companies need to be more discerning about the industries they choose to deal with. ‘The industry is still heavily connected to the underlying causes exacerbating climate change and global warming,’ he says. ‘Insurers are actually quite heavily invested in the fossil fuel industry. They also support the sector by providing insurance to fossil fuel projects. If those projects, like new coal power plants or fossil fuel intensive infrastructure, if they don’t have insurance then those projects can’t be built.’”
If you’re wondering what ponderous academic or extensive practical experience someone at Queen’s brings to the issue of the prudence of Australian insurers, well, ask no more. “Korey Pasch is a doctoral candidate in the fields of International Relations and Comparative Politics.” And when a PhD candidate in political science and a legal expert tell you insurers don’t know from risk and hurricanes are getting worse, what more need be said?
Well, there’s a line from Warren Buffett in 2015 that Eric Worrall (again) quotes in commenting on this story. “Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.”
Aaaargh. Super-cats on top of everything else? Is Smilodon back or something? No. It’s insider jargon for big catastrophes. And the reason Buffett’s not in the catastrophic insurance business is that the premiums are too low because (wait for it) the risk is too low. But what does he know?
This: “when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.” As Worrall notes, Buffett believes in climate change in his private uninformed life and gave $31 billion (yes, you read it right) to the Gates Foundation in 2006, much of which went on climate issues. But in his professional informed life he blows it off.
Unlike the experts who say.
Faked problem, benefit-bringing solution for the Elite. Easy money, profit, power, control, and glory. To get higher rates and wider coverage, break more windows, scare/threaten the cattle, letting us know who the World Mafia is: the solution-talking heads of Banking, Insurance, Corporation, Industry, "Investment" (Stock/Gambling Market), Government, Education, Media, Entertainment, Professional Sports, Art, Science, World Organizations, and the rest of the elite, inbreeding, world/business hegemony-seeking, intra-competing family. Their invisible, evil "virus" plague is their latest racketeering, profiteering, conman game.
The monster under your bed wears no clothes, it exists only in your superstitious mind, the one that is used to increase profit, power, control, and glory for the already beyond mega-rich and -powerful Elite like Buffet, Gates, Thistlethwaite, LBJ, Kennedy, Trudeau, Trump, Putin, and all other heads of Government, Banking, Corporation, Media, Industry, Insurance, Investment, Education, Science, Art, Entertainment, etc, everybody but cattle-humanity.
To believe is to admit ignorance, to not know. Religion, Elitists, and Mod Civ revealed.