Insurance companies grapple with climate change-fueled risks

In a world of climate uncertainty, insurance companies are raising rates to cover risk and replacement costs.

Twenty years ago, the Mānoa Valley flood caused more than a million dollars in damages — and that storm was not a full-blown hurricane. To put it into context, Hurricane ʻIniki in 1992 cost $3 billion in damages and the Maui wildfires are estimated at twice that.

Back in 2010, J.P. Schmidt was the state’s insurance commissioner, and he had just convinced an insurance company from Korea — Dongbu — to set up shop in Hawaiʻi. He also served as Maui County corporation counsel. He now has a firm, Abaris Global.

The Conversation reached out to him in Denver to get his take on things.

“Insurance companies have had to deal with much higher risks than they had anticipated. And a lot of that is due to global warming, climate change,” he said.

He said that insurance companies are pulling out of places like Florida, California and Louisiana because they feel that they can’t price their premiums high enough to recoup losses.

“They’re all to some degree due to climate change creating new and more violent, more expensive risks. But then there are also local conditions, local laws in each state that are problematic for the insurance companies. And so in Hawaiʻi, we have to be aware of those difficulties and the difficulties that companies have with laws and requirements,” Schmidt said.

Schmidt said so far, he hasn’t seen the same thing happen in Hawaiʻi. But he said state officials need to be proactive.

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This interview aired on The Conversation on May 23, 2024. The Conversation airs weekdays at 11 a.m. on HPR-1.