What We Worry? The Big Shrug Over Climate Change.

As climate change denial ramped up I began to wonder where the prudent worriers in our economy had gone. Foremost among this doleful and boring but responsible fraternity are the insurers. Where were they? Why weren’t they siding with the climate change scientists and giving economic muscle to the scientific warnings? It appears there was some translation of risk warnings into dollar terms, but the message was very muted. It seldom reached the public conversation, if ever.

The insurance industry has been slow to warn. Here's an article about this.

The Guardian did report as early as 2011 that Lloyds had begun warning about climate change risks, but 2011 was hardly early. In 2014 they warned again.

In this 2013 article Smithsonian described the insurance pivot as an adjustment, a subtle turn of the dial. This was before they were purchased by the fossil fuel billionaires, the Koch Brothers.

In 2014 MotherJones wrote about how the insurance industry was largely ignoring or downplaying climate change.

I suspected this broad diffidence was because the insurance giants had been bought up by financial giants who were not insurers. An investment company is inclined to think fossil fuel profits are sexier than climate change warnings. They are likelier to tell the killjoy divisions to shut up and quit spoiling the party.

I think it was another case of Moneythink overriding our rational mind. If you are a large financial company your fiduciary responsibility (I call it a fiduciary excuse) to earn maximum profits overrides your responsibility as a citizen, your responsibility as a member of society and a comfortable beneficiary of that society.

I’ve read more since I posted about insurers' climate change denialism, and learned more about the evasions and muted warnings from insurers. Insurance policyholders are as likely to be deaf to warnings as insurers are to be dumb about the risks.

Which is where the media’s deafness comes in. (The news media's denialism has had a neat bag of tricks, as reported recently in a CNN opinion piece––why does critical thinking get relegated to the opinion pages anyway?) The sad habit of evenhanded coverage hasn’t helped. There is a habit among news divisions to “play it safe” by giving both sides of an argument equal weight, regardless of the merits of the opposing arguments. It's a bit like warning people that "There may or may not be a tornado coming. You decide." Some risks are too large to play that way, and climate change is one of them. It has been described by scientists as an existential risk for decades and the pussyfooting of media has enabled fossil fuel companies’ PR departments to sow doubt and paralyze our response. I compare this to the appeasers and America Firsters of the 1930s. We will need a WW2 scale mobilization to confront climate change, where a decade or two ago we might have confronted it without as much disruption.

Or maybe disruption is something the corporate class has anticipated and planned for. Disruption gives greater opportunity for control to those who have the resources and the positioning. For example, have corporations been buying options on lands that climate change would suddenly make viable, and buying up technologies we would desperately need (enabling certain fossil fuel villains to hop on a white horse and rescue us all once they’d reaped the maximum profit from the long con of climate change denial. Is this the kind of calculation that the sharper minds have been deployed to figure out? Vs. the less sexy calculation of risk and avoidance of risk.)

These articles address the problem that kicks in when insurers decide to abdicate instead of confronting risk. (From Lexology.com and from Reuters.

Instead of helping our massive economy address the risks and helping us put policies in place that reverse the risks, what do insurers do? I guess they shrug and give up. They pocket their winnings and leave the game.

Our Financial House Doesn't Actually Need A Roof

I read a New York Times piece this morning about the insurance business. You should read it. You wouldn't believe the kinds of tricks and schemes they get away with. I've learned some new terms for trickery. "Captive Reinsurance" for example. "Hollow Assets" is another. Some of the names of these shell companies will make you laugh. "Tapioca View." Is that a company you'd trust with your money? Insurers used to be the most careful people in the world, but they've changed. Fast and Loose makes bigger profits, at least in the short term...

Imagine paying for the insurance policy on your house with shingles from your roof?

When it isn’t raining, insurance companies think their financial structures don’t need a roof. As long as the sun shines and the premiums pour in they don’t need to have a functioning brain.

They’ve behaved the same way about climate change and the enormous risks––beyond enormous risks––sea level rises present to insured coastal properties and port facilities. "If it’s not happening now it will never happen” seems to be the bizarre logic of insurance giants.

“What me worry?"

How can they be so foolish? Because foolishness earns more in the short run. And the more a division earns this quarter the more important it is. And the more colossal the foolishness the likelier the government will bail them out. Insurance companies used to be more careful and responsible than that.

Well, a few of them are beginning to come around and behave responsibly. Finally.

Why did it take them so long? I suspect it’s because the big insurers have changed from thinking of themselves as insurance companies into thinking of themselves as investment companies. The side of the company that invested the premiums became sexier and more profitable. Also, low interest rates made secure, safe investments like bond funds less profitable and therefore less sexy. Life threatening risks might be bringing their attention back to their jobs. Is it in time?

The Insurance Industry Has Been Asleep

Scientific American is reporting on catastrophic flood projections in NY this century.

Wired magazine is describing similar catastrophic flooding in Miami.

Other coastal cities will experience similar catastrophe worldwide.

Two Questions:

Why hasn’t the insurance industry factored this enormous future cost into the premiums paid in coastal cities?

How and when will the insurance industry offload this enormous cost onto the public?

The insurance industry is supposed to inform its risk calculations with the best science. They didn’t.

Why?

Because the major insurers have for a few decades (at least since the merger mania during Reagan) considered themselves financial companies, not insurance companies. For this reason they’ve been more focused on the huge profits from fossil fuel investments during peak oil than on the huge costs that fossil fuel will precipitate through climate change as our major port facilities and coastal properties are flooded.

They’re all insured, by the way.

But major financial companies are too big to fail, so we will pay for their greed and the mistakes greed caused them to make. If, as purists say, capitalism and free markets are supposed to do our society’s thinking and planning, they’ve certainly failed us. They’ve all been asleep, selfish, self-centered, self-satisfied fools.

THE TRIUMPH OF STUPIDITY ON CLIMATE CHANGE

Civilization, meaning everything in history that comes after we learned to farm, in fact all of history, is founded upon reliable climate, reliable rain and growing seasons. Climate change caused by the greed of fossil fuel billionaires fucks all of that.

Some places will be warmer, some colder, some will have longer growing seasons, some shorter, most will fluctuate meaning farmers will have to guess and hope even more than they do now (imagine the crop insurability problem then).

The changes will be dramatic. Some places will be too dry to support life. Some will be washed away in huge floods or flattened by huge storms. Things like this that happened in the Bible were interpreted as God’s punishment for wrongdoing––our wrongdoing this time is stupidly placing ourselves in the political grip of fossil fuel billionaires.

Think we can solve these problems by shipping grain from one lucky continent to another? Picture all of our functioning and extremely expensive port facilities under water and no longer functional.

Weird how the big insurers haven’t cottoned to this huge risk overhang. I think it’s because most big insurers think of themselves as investment companies investing the premiums they collect rather than insurers of risk, and right now at peak oil their biggest investments are with the oil companies. Colossally stupid. Stupid on top of stupid, which should help disprove the free market capitalist’s religion that says money is smarter than any of us. Money is mostly just greedy.

The greed of the top 1% may doom all of civilization, murdering millions. We should mind.

There is a local weatherman where I live who hosts “documentaries” that explain why Climate Change and Global Warming are stupid hoaxes. He says it’s hard enough to predict weather two weeks out, so it has to be impossible to predict what will happen in two decades. This sounds persuasive if you don’t think about it. Children are unpredictable too. We can’t predict what they’ll do tomorrow, but we have a pretty good idea what they’ll be up to over time, and we can be pretty sure in twenty years they’ll be twenty years older, with average luck. With average luck they'll live lives like ours, with better than average luck, better lives. Throw that average luck out and what happens?

Climate stability gives us average luck that we can build on. Climate instability takes that away: no predictability, no reliable averages to plan our complex civilization around. Climate scientists are warning us about the risks of enormous changes in our children's lifetimes. What changes exactly? It's hard to say, and that is the danger. Unreliable climate destroys civilizations and has ground many into dust over the centuries. Usually it happens slowly. Previously the climate changed slowly. Not this time.

The well paid attractive telegenic criminals who are distracting us from this enormous danger are being paid to distract us and dissuade us. 97% of all climate scientists agree, but we are being persuaded by smiling weathermen and ignorant politicians to ignore science.

These shills are being paid to help shore up a dirty 19th century industry that threatens us all. They are being paid to help us confuse Weather and Climate. Weather is if it’s raining outside. Weather is a discussion about whether to carry an umbrella tomorrow. It’s not deep stuff. Climate change is as deep as life and death for our nation, the happiness or misery of our descendants' lives, the arc of history itself.

Climate is the reason we have a prosperous nation. We are lucky to have a good, reliable, moderate and predictable climate. Climate Change is why there are dead civilizations buried under the sands of North Africa. Usually climate changes slowly. We are changing it radically and quickly and lethally unless we decide to stop changing it by changing the way we fuel our lives.

Control Fraud and the Sexiness of Bribed Executives

I learned a new term today: Control Fraud. (Thomas Frank writes about it at Salon.) It’s where the top executives in a company ignore warnings because heeding them would limit their huge pay packages. It’s why Bank CEOs ignored the flood of liar’s loans that would collapse the bank because they were making huge bonuses based on the volume of loans, and they would keep those bonuses even if the bank failed.

Control fraud has appeared in other key areas of our economy. I’ve been asking for some time why the insurance industry has been so silent about the huge risks of climate change. Their companies would quickly collapse if and when the claims came in on submerged port facilities, flooded coastal cities, croplands flooded or desertified, and the many other catastrophes that climate scientists have warned about. Another kind of control fraud might explain this.

The thing is, during the Reagan era (which we’re still in) insurance companies stopped thinking of themselves as insurers. Such a gloomy, pessimistic role. Not fun at all. Sexier to be in high finance. So they transformed into financial giants. Now they weren’t in the business of insuring things, they were in the business of investing insurance premiums, and one of the best investments of all in recent decades has been fossil fuel companies. They earned bigger returns from fossil fuels and from investments that benefited from plentiful oil and gas than they did from insurance. Because the high finance guys were making the big returns they outshouted the doleful insurance worriers.

I’m guessing cheap gas was the bribe the giant food companies were taking. Food supplies are the most at risk from climate change. If the climate moves away from your thousands of grain farms or from your elaborate grid of grain depots and rail lines, you are out of business. (Business always matters more than famine.)

But it was only in the past year that Lloyds of London and a few other insurance giants began pushing warnings and insurance rates based on climate science warnings that have been growing louder for the past two decades. General Mills finally made a clear statement warning about climate change.

Why this long delay? Why do huge companies run by intelligent men and women choose to ignore the best information? Why do they ignore science? Because the money they get now is more persuasive than the ruin they might experience later. And it will kill a lot of other people before it hurts them.

In the area of financial collapse the warnings were muted because our financial intelligence is corrupted by this same Control Fraud. Economists are paid by the financial giants. They are flattered by the friendship of the top people taking these Control Fraud bonuses (or should we call them bribes?). University economists and professors are sitting in chairs endowed by the same finance CEOS who sit the top of the corruption. Financial writers are their priesthood, they worship these big shots.

Why doesn’t President Obama’s Justice Department go after these people? He is. But the cases are brought slowly and in parts. Complex cases are more often settled and the settlements are growing larger. The larger the target the harder the prosecution. I hope I am seeing the unfolding of a longer game.

Still, there ought to be long term criminal jeopardy for Control Frauds of this kind. No statute of limitations. If there's no end to college debt collection, there should be no limit to this kind of prosecution and recovery. These cases should also be very class actionable––lots of victims, and those victims have descendants. This legal reach would also need to be global, because these billionaires keep their fortunes overseas. The irony is that trillions of their ill-gotten gains are held in banks on islands that will be underwater when the oceans rise.

Why Have Insurers Been Silent on Climate Change?

I began asking this question among economists, opinion shapers and policy people. Then I read the article in the Guardian, about how Lloyds is finally beginning to charge for climate change risk. Then, just this week, Farmers Insurance began filing lawsuits, not against the fossil fuel companies triggering climate change, but against the communities who failed to plan for the harm climate change will wreak on properties insured by Farmers. Why did it take so long for the insurance industry to wake up?

Maybe they were distracted. Maybe they had (in Dick Cheney's famous phrase) "other priorities." Are insurers still in the business of protecting against risks? Is that just a sideline, a way of raising investment capital?

I would suggest that insurance companies stopped being insurance companies at least a decade ago. They evolved into financial companies whose main duty is getting maximum returns on Wall Street…and these days that means sizable investments in the very profitable peak-oil fossil fuels business. Damn the risks. Profits tend to speak louder than risks at shareholder meetings.

Last month* I put these questions to a small group of people whose job it is to think forwardly. One reply from (a national columnist’s intern) suggested I need to learn more about how business works. The rest was silence. It is important to consider which division of massive financial companies dominates the thinking.

There was another time, in 2006 and 2007, when huge profits dulled the financial sector’s awareness of significant dangers. We ended up paying for their stupidity. Which means they are probably still stupid.

* "When you think of the vast liabilities of violent weather and rising ocean levels, insurers should be mounting a narrative to overturn the fossil fuel industry's campaign.

One reason occurs to me why they’re not. Perhaps insurance companies are overinvested in fossil fuel stocks. The returns on these stocks are huge because of the subsidies and because of peak oil, but they cannot possibly outweigh the potential for disaster.

Can the issue be raised that insurers are investing in industries that are causing these disasters? The causal link would be difficult legally, but less so as a narrative, letting the public change its mind.

Maybe it’s time for people to start writing to insurance companies. Ask an actuary if climate change will pose risks to their insured and to their companies. These issues have enormous economic consequences. The losses may be even larger than profits can cover."

Hedge Fund Billionaires are Saints and Schoolteachers are Greedy Bastards

So, let's try and understand this...

Fifth grade teachers and firefighters who rescue kittens from trees are greedy bastards.

And hedge fund billionaires are saints devoted to the wellbeing of the community.

I will pause while your mind explodes.

This is really happening. Voters in Rhode Island have elected a fearless crusader who is going after the greedy schoolteachers on behalf of the heroic hedge funds.

The people who worked their whole lives on behalf of the community, teaching children, fighting fires, cleaning streets, policing parks, taking less pay in exchange for a pension, are actually terrible selfish greedy monsters who must be reined in and their retirement must be confiscated by the good, honest, crusading friend of Wall Street who is working diligently to return those pension dollars to the offshore bank accounts of the brave, honest hedge fund billionaires who know best what to do with that money.

Up is down. Good is bad. Greed is admirable. Unselfishness must be punished. Jesus was wrong. Hitler was right. ...Wait a minute, Obama is Hitler... I'm confused.

What do we know for certain?

Questioning billion dollar bonuses for Wall Street bankers is like lynching. We know that. It was in the papers the other day.

ObamaCare is like what Hitler did to the Jews. That was in the paper the other day too.

The CEO of Goldman Sachs is more saintly than Mother Teresa. That was also reported this week.

Mr. Rogers, who talked about kindness and unselfishness, was a sick individual who sapped the life force from two generations of Americans. I heard that on FoxNews.

And, yes, public school teachers and firefighters are horrible greedy bastards. It's been widely reported.

It's so hard to keep a solid grip on reality, on our values. Luckily America has talk radio to tell us what to believe.