Will Climate Change Make Your Home Uninsurable? | Amy Barnes | TED

Overview

This talk explores the critical intersection of climate change and the insurance industry, highlighting how rising risks from extreme weather events threaten the affordability and availability of insurance. Amy Barnes, a climate risk advisor, explains how this issue impacts homeowners, financial systems, and global resilience, while advocating for proactive investments in adaptation and preventative measures.

Notable Quotes

- Insurance only works while extreme weather remains a risk. If it becomes a near certainty, insurance becomes unaffordable and potentially not available. — Amy Barnes, on the limits of insurance in the face of climate change.

- Investments in preventative measures have a payback of 10 to 13 dollars for every dollar spent. — Amy Barnes, emphasizing the economic benefits of resilience.

- Insurance is doing exactly what it's supposed to: pricing risk and giving us a warning sign that assets may be worth less and credit could be less available. — Amy Barnes, on the role of insurance as a financial signal.

🌍 The Role of Insurance in the Economy

- Insurance is foundational to modern economies, enabling activities like flying airplanes, performing surgeries, and securing loans for homes and businesses.

- Amy Barnes explains that insurance works by pooling the losses of the few and spreading them across the many, making risks manageable.

- Financial transactions, including mortgages and wind farm investments, often require insurance to proceed, making it a lubricant for the financial system.

🔥 Climate Change and Uninsurability

- Extreme weather events driven by climate change are making insurance unaffordable or unavailable in many regions.

- By 2100, 1.3 million homes in Australia and 10,000 homes in New Zealand are projected to be uninsurable. In Canada, nearly 10% of homes are already close to uninsurable.

- Rising premiums signal that risks are becoming too costly to bear, with significant implications for property values, mortgage foreclosures, and financial stability.

💸 Financial System Risks

- The inability to secure insurance leads to asset devaluation, reduced credit availability, and increased loan defaults, creating ripple effects across the financial system.

- Long-term loans and mortgages are particularly vulnerable as insurance becomes unaffordable over time due to worsening climate impacts.

- Investors may exit high-risk areas, potentially triggering liquidity crunches in vulnerable regions.

🔧 Investing in Resilience

- Preventative measures, such as retrofitting buildings or installing living roofs, can significantly reduce risks and costs.

- Amy Barnes highlights that every dollar spent on resilience yields a return of $10 to $13, making it a cost-effective strategy.

- Despite the benefits, current funding for resilience efforts is insufficient, requiring greater industry advocacy and investment.

🌱 Innovative Insurance Solutions

- Parametric insurance, which provides payouts for specific events like extreme heat or drought, is helping vulnerable populations, such as small-scale farmers in Kenya and India.

- These programs are improving livelihoods but face the same affordability challenges as risks escalate.

- Barnes envisions insurance as a tool for incentivizing societal action, urging investments in adaptation to keep risks manageable and ensure future financial stability.