“From boardrooms to bedrooms”

Republished by Illuminem.com

October 12, 2023

https://illuminem.com/illuminemvoices/from-boardrooms-to-bedrooms

Glad that Illuminem picked this story. It recently appeared in the Chartered Insurance Institute’s Journal. Not only is the climate crisis breaking the insurance silo; telling us how the cost of insurance is bound to escalate to a point where things might become uninsurable. Without any insurance the assets may become worthless. It is also telling us not to mindlessly create assets in high risk prone geographies by disregarding adaptation and resilience. That is just part of the story.

During the 2008 housing market crash, subprime mortgages were one of the primary causes of the crisis. Many homeowners who had taken out subprime mortgages were unable to keep up with their payments, leading to a wave of foreclosures. AIG nearly went bust for adventurism with the home portfolio. Regulators were caught napping.

Homes are back at the centre stage. Insurers are not only risk managers and carriers, they are also investors. By investing in fossil fuel segment they are like hospitals selling cigarettes, as Peter Bosshard puts it. Wildfires, windstorms, floods and sea level rise have just about begun to rattle the American homeowners. The debate thereby has moved from boardrooms to bedrooms. It will come back to boardrooms as more and more assets become stranded.

As the climate insurance bubble builds up, Treasury Secretary Janet Yellen has sounded the alarm. She believes it is necessary for the Financial Stability Oversight Council (FSOC) to examine how these shifts may affect the wider financial system. For one, insurers surely need to urgently stop behaving in their oxymoronish ways. The rest of the world has a lot to learn from what ails the US of A, before it’s too late.