Is a creeping catastrophe insurable? Eberhard Faust, climate risk researcher at Munich Re, one of the world's largest reinsurance companies, and disaster historian Scott Knowles talk about the instruments and scale-problems involved in calculating and transferring the costs of climate-change-related events on the ground.
Scott Knowles: In February you were at the German meeting of climate experts in the context of the Intergovernmental Panel on Climate Change (IPCC). In view of that state-of-the-art discussion, what are some of the projects taking your time right now, some of the most exciting developments recently in climate research and around development of instruments to deal with climate change?
Scott Knowles: So right now, is it just limited to rainfall events?
Scott Knowles: When I looked at Hurricane Katrina from the perspective of emergency managers and what they were trying to understand about what had gone wrong in infrastructure systems and the like, one of the key findings was that there was a failure in communication to motivate people to leave. Every individual and every family had to make decisions in a short period of time about what to do because leaving also incurs a cost. I think there is a metaphor here more broadly for climate change discussions ‒ staying a certain path has a cost and leaving and changing the path has a cost too. So individuals in New Orleans had to make that decision. And as researchers looked at it, what they found was that fear was not the only motivator, in fact fear is, of course, very perspectival, very personal, but fear operates at different scales. You may be afraid of something happening right now, but other fears may be something that you worry about happening in the future, or something that’s in the past.
And this is what they put a lot of emphasis on, and what I want to get your reaction to: individuals in New Orleans did not trust government, they did not trust the police, not to mention science, and by extension they also did not trust weather forecasters. It came down to a question of who in the community could we have as an interface between experts and the public. Experts might have very esoteric knowledge, very important knowledge, but who will serve as sort of interlocutors or trust agents to communicate to a broader public what you really need, that this is real, that this time it’s very important. Some of the conclusions I came to were that it was pastors, ministers in the church, local people, local politicians – not state or federal politicians! Often it was a matter of “did you know someone,” which is a very hard thing about climate change adaptation and mitigation. It will not be possible for you to go and meet with all 320 million Americans, right? We have to find agents of trust if you buy into this construct. Lobbyists such as the American Petroleum Institute figured this out a long time ago: rather than going after scientific data and scientists per se their angle for some time has been to say to the public: “You do not share the same value system as these scientists, these scientists are not trustworthy.” So it’s not an argument about whether this is true and that is true, it’s much more an argument about trust and I wonder how you feel about that and how it plays back into this discussion around communication of climate science findings?
Scott Knowles: Thinking again about the need for trusted actors, you know, I’ve thought a lot about the role of the insurance and reinsurance industry broadly and also the military in different countries and I think you could also include the agricultural sector, at least in the United States, which is drawn to a very small proportion of our economy and yet culturally has an outsized importance ‒ farmers are still held up, they know the land, they are trustworthy, they have a sort of commitment over long generations. Politically they are not easy to generalize as left or right, there is a sort of separate category for them. The reason I talk about these three, or think about them is because one of those sectors has to take the long view within our society. These are sectors that have made commitments to very forward thinking, looking at least a generation ahead. I also wonder if there’s some way to think about leveraging the cultural power of the insurance and reinsurance industry ‒ in some ways you’re in the sort of restraint business: think about the military, when it's not at war the military is often also in the restraint business; it’s about thinking over things that can go wrong over long periods of time and to prepare.
Scott Knowles: What you were describing in terms of sustainable insurance solutions is something I studied in the American context. And historically, what you were saying on public-private arrangements must be emphasized in that there are times at which the scale of problems goes beyond the capacity of governance. That doesn’t mean that governance doesn’t catch up. But you know, 125 years ago, there were peers, people who did the equivalent of what you do today, but they were doing it around built systems in urban spaces and they were concerned about fire, or they were concerned about water quality. And they turned to private instruments to assist them across a gap, a period of time when government and the scale of a problem had gone beyond the capacity of government to achieve real change democratically.
And that meant many different inputs of information, new professions: fire chiefs, fire marshals, the forest service; and what happened over one generation in the United States – it also happened in Germany, Britain, and France – is that this sort of private information, which individuals wanted, to have the insurance work, then worked its way into governments in the sense of having codes and standards and various other things. And I think there may be some interesting parallels to make here around developing countries, where people may not have the ability in Bangladesh, for example, to rely on the government to engage meaningfully in some of these efforts, global government efforts to try to bring about mitigation or sustainability, but they may be able to rely on the insurance industry or also on private sector trade organizations, which have been very very active in trying to shape extraction, in trying to shape forest management with insurance, and the various things you’re saying. When I’ve talked to some of my colleagues about this before they say, “Well you’re very right wing, to have faith in these private instruments.” And my response is that it’s much more complicated than that. We have to look at this as a process where there are new risks created, and government is not always capable, particularly under democratic systems. China can make changes very rapidly within society. In a free democratic society, government doesn’t work that way. It takes time to catch up, to apprehend risk, and to make social society-level changes, whereas the reinsurance industry, or in a private forest-management consortium, they can be much more nimble. And I think that’s worth our consideration ‒ the history and evolution of risk knowledge not as singularly public or private achievements ‒ this history could be equipment, so-called, for this time.
Scott Knowles: That’s an important case to look at, and just going back to something you said earlier, unexpectedly as insurance penetration increased in the US, it actually led to – what you might expect also – investigation, concerns about fairness, concerns about protection. It actually helped to build the judiciary sector as well, because it’s such a unique kind of product. It had these interesting important effects as Americans were going through a progressive move towards increasing the safety and standard of living for individuals, so I think it’s very well worth our consideration in exactly the way you’re describing.