Investment Advisors End Climate Disaster Claims – Is It Floating With It?

Guest essay by Eric Worrall

Based on Chris Leithner, founder of Leithner & Co Investment Advisors, the obvious upward trend in weather disaster insurance payments disappears when you adjust for inflation and population growth.

Will climate change soon make Australia “unresponsive”?

CHRIS LEITHNER
Leithner & Company Ltd

For many investors, that’s indisputable: a warming climate has increased the number and severity of natural disasters. What’s more, this supposedly rising tide of devastation threatens Australians and their insurers. These claims are being repeated more and more often and fervently, but one glaring weakness accompanies them: they almost always lack reliable – really, often any – supporting evidence. . In contrast, I analyzed this country’s most authoritative source of relevant data, the Insurance Council of Australia’s Historical Disaster Database, and this article summarizes my results.cause ; therefore, climate change – man-made or otherwise – cannot cause it.

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Are natural disasters becoming more frequent in Australia?

I grouped 302 events that meet this definition by their fiscal year and summed the events per fiscal year (all subsequent references to “year” mean fiscal year) . Figure 1 plots the results. At first glance, the number of NHCEs appears to be increasing over time. The average is 5.6 per year; prior to the mid-1990s, annual numbers were often below average; since then it’s been mostly above average, especially in 2016 (but not, notably in 2020 or 2021: their numbers are the lowest in almost 20 years). As a result, the trendline is sloping up significantly – and its rate of rise is accelerating.

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In 1967, the population of the Gold Coast (72,000 people) was only one-tenth of today’s population (710,000 people) and Hurricane Dinah missed it by more than 100 kilometers. If it recurred today, it would cause nearly $5 billion in damage and rank among the costliest natural disasters in Australian history (Figure 6). Coupled with the severe hail that hit the area that year, their combined normalization cost ($6.3 billion) was more than double that of the 1974 Brisbane flood.

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Key points in Table 1 in general. Figure 2 shows the average losses per NHCE since 1967 – and corroborates my suspicion that the actual number of NHCEs (as opposed to the recorded figures) is increasing. Its meaning is ca. $350 million and its trend is weak negative. I do not deduce that NHCE is becoming less destructive over time; rather, I deduce (and will soon confirm) that the damage they do is almost constant and ICA’s tendency to count them has increased. In other words, it did not record minor events in the 1960s and 1970s, but recorded since the 1990s.

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Do these results allow us to unequivocally rule out any possibility that the frequency and severity of disasters is increasing? They do not. We also cannot be certain that our conclusions will extend into the future. Similarly, however, Proponents of received wisdom must be humble and honest. They cannot reliably claim – as they always and unequivocally do – that the frequency and severity of disasters is increasing, climate change underlies these increases, and as such, they threaten insurance companies. Harddata simply doesn’t support these glib assertions; quite the contrary, they weaken them.

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My results will not surprise Warren Buffett. That’s because they corroborate with the Australian data what he found in the US and global context. As the founder, head and largest shareholder of one of the world’s largest insurance and reinsurance companies, his views should carry a lot of weight – and unlike most Experts, you have a lot of opportunities in the game. On March 3, 2014, he told CNBC:

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Read more: https://www.livewiremarkets.com/wires/will-climate-change-soon-make-australia-uninsurable-2022-01-09

Chris Leithner does not rule out the possibility that climate change could create problems in the future. What his analysis proves is that the claim that climate change is making weather disasters worse is not supported by historical trends, once you adjust for inflation and population growth. number.