By Praveen Gupta
Uninsurability creeps in slowly. First as a price hike, then coverage restrictions. Then suddenly, that changes to very limited coverage and steep prices before that too evaporates. The pace and patterns may vary between insurers, reinsurers and geographies. Can the trends at home be different vis-à-vis the big, (not so) beautiful bill way the US takes and while Europe rapidly abdicates what appeared to be utopian? Not for long!
The India Heat Summit 2025 – recently organised by Climate Trends in New Delhi, was long overdue; a serious heat spell provided a perfect backdrop. Climate scientists Dr. Chirag Dhara and Dr. Ayantika D.C. anticipate not just longer heatwaves but floods, as well, this year.
What’s giving the planet a fever is an outcome of a serious energy imbalance. According to renowned environmentalist Bill McKibben, “The warmth we’ve added to the atmosphere – the heat equivalent, each day, of 400,000 Hiroshima-sized bombs – is already producing truly dire effects, decades or even centuries ahead of schedule.”
The heat added to the atmosphere each day, equal to the energy from 400,000 Hiroshima-sized bombs, is causing serious consequences, arriving decades or even centuries earlier than expected. Photo: Sual Parab/cc-by-sa-4.0.
A speaker from the National Disaster Management Authority (NDMA) at the Delhi event expressed how each disaster strike is unique. That is what the polycrisis is about. Once you set aside the silos that the traditional insurance industry operates in, clouds clear around the polycrisis and other triggers.
It may arise from boiling oceans, turning acidic owing to the pollutants, breached Planetary boundaries (seven out of nine), wobbly earth systems (a slowing or stalled Atlantic Meridional Overturning Circulation (AMOC) for instance), thawing permafrost, melting glaciers, biodiversity loss, higher precipitation, stronger hurricanes, and rising frequency and severity of floods and droughts. It could manifest as a pandemic, drought, flood, catastrophic fire, sea-level rise, pollution, biodiversity loss, or, for that matter, a major cyber attack or an AI situation. And a lot more beyond our current grasp of rattled Earth systems.
How could the cocktail of climate change, pollution and biodiversity loss impact the health insurance sector? Likewise, how would the asset class be able to cope with stressors? Where will the capacity come from, and what could become uninsurable?
“Air pollution has been classified as the world’s gravest health and environmental threat by the World Health Organisation (WHO). It is responsible for a majority of heart disease, cancers, and even diabetes onset,” wrote Akshay Joshi of Ambee, with unrefutable data to back this, ahead of COVID-19. Let’s look at evolving nuances; remember, Delhi’s outside air might be less polluted than your living room.
What could be the next emerging zoonotic disease? About 3.8 million people each year die with invasive fungal infections worldwide, with pathogens being the main cause of death in 2.5 million of those cases, according to research published last year. The projections assume rising heat in Europe. What if the AMOC were to slow down as trends reveal – would Europe freeze and Asia bake?
Here’s a shocking fact that Shailabh Kumar, Founder, Uplift Mutual Development & Aid Society, shares: “Seven thousand people slip into poverty every hour in India because of catastrophic health expenses.” This was during the early days of the last pandemic. We have had recurring heat waves, and floods of all kinds – microplastics for one. Not that plastic pellets found on the Kerala coast after a shipwreck were the first to pose serious environmental impacts. Microplastics are commonly detected in human tissues and organs, with distinct characteristics and entry routes, for which variable analytical techniques exist. Could health insurers be considering proposers being subjected to testing?
What is more dangerous? For sure forever chemicals (PFAS) are no less harmful. Insurers both as risk carriers and investors ought to nip such ‘innovations’ in the bud. We might still be in an Environmental, Societal and Governance (ESG) denial mode. However, ignorance is no excuse.
Meanwhile, insurers in the pensions business must watch out: the case ‘McGaughey and Davies v. USS Ltd, and its Directors’ set a positive precedent for beneficiaries seeking to “hold directors personally responsible for exacerbating damage to the climate”; thus it may be instructive for the future wave of litigation against directors and officers complicit in climate damage. The United Kingdom’s biggest pension fund, the Universities Superannuation Scheme (USS), was compelled to reverse roughly 30 per cent cuts to defined benefit pensions because of this case.
Anna Hurlimann and Sareh Moosavi write in The Conversation that climate change should be a key consideration for designing, building and managing our cities. However, they rue, policies that govern the design and construction of cities do not achieve this. They also say that, “The emissions generated need to be minimised and eventually eliminated… We must build in locations and in ways that reduce climate risks.”
Urbanisation that ignores climate change is further complicated by subsidence, which is caused by the overuse and over-extraction of ground water from land weighed down by urban construction. Subsidence has become a phenomenon in inland areas as well as coastal regions that are already afflicted by rising sea levels owing to climate change. Such a slump in the ground, wrote Anjana Ahuja for the Financial Times, “can weaken vital infrastructure, including buildings, bridges and sewers; reduce the capacity of underlying aquifers to hold water; increase flood risk; cause sinkholes. The new findings add to the need to take subsidence more seriously, a risk compounded by climate change and urban population growth.”
As India urbanises rapidly, it will be increasingly prone to intensive heatwaves. With it will come road building, which will mean subsidence and sinkholes particularly during the monsoon. Sentinel-1 SAR Imagery is an excellent tool for tracking the sinking patterns of Indian cities.
Rising levels of the Arabian Sea and Bay of Bengal pose a threat to India’s coastal livelihood, according to the World Metrological Organisation (WMO). The impact of rising heat caused the central Himalaya and Central Asia mountain ranges Tian Shan, 23 out of 24 glaciers, to lose ice mass, leading to an increase in glacial lake outburst floods (GLOF) and landslides. After Antarctica and the Arctic, the Himalaya holds the third largest deposit of ice and snow.
Mumbai is one of the few megapolises in the world to have nuclear reactors within its boundary – renowned author Amitav Ghosh explained in an interview with nuclear safety expert M.V. Raman that the possibility of a Fukushima-like situation developing cannot be ruled out. Are we prepared for this?
Data centres may be fashionable. Not only are they thirsty but have a problem with their waste water.
Uninsurability need not always be a direct outcome of claims and premium, supply and demand. For instance, climate geo-engineering may have unintended consequences. Its usage to mitigate heatwaves in one geography may inadvertently trigger it in other parts. The intensity of its outcome may thereby lead to adverse outcomes for prospects of insurable affordability.
A well-established practitioner plots the path: “Insurers tend to be reactive rather than proactive so the application of price increases and sub-limits will probably precede the withdrawal of cover for lines of business, subcategories of particular lines of business, and situations impacted by climate change. However, the availability of cover is likely a function of when, not if. The pattern that can be seen so far is that insurers will provide cover until they are hit with an event – wildfire, flood, spike in health claims, etc. – and then they start to increase premiums, apply sub-limits and ultimately refuse to insure.”
Dr. Shreeraj Deshpande, Insurance Consultant, echoes this: Over the years, this market has seen a steep increase in premiums, especially for senior citizens. As the premiums increase the population in good health feels the pricing pressure compelling them to move out. This will concentrate a high risk population in the insured pool, resulting in higher loss ratios and a further increase in premiums. Added to that is the practice of underwriting (evaluating) an insurance at the time of a claim instead of when it is bought. What you thought was affordable when buying a cover suddenly becomes expensive!
Bottom trawling, deep-sea mining, high seas assaults on cetaceans, decimation of our rainforests and biodiversity, plus pollution... the point of no return is around the corner, and hence that vital reminder: “There is no planet B.” Photo: Ivan Radic/cc-by-2.0.
Just when America is witnessing supply side constraints for wildfire, windstorm and flood losses, serious challenges are emanating from the ‘for profit’ form of healthcare; the killing of United Healthcare CEO is still fresh in our mind. Meanwhile, yet another heatwave is raging in Europe, home to some of the largest reinsurers and insurers, and thriving disaster capitalism. At home, India is trying to increase the penetration – the target is insurance for all by 2047.
Is disaster capitalism replicable and sustainable? Maybe you could game it up to a point. That point of no return seems to be around the corner. There is no form of insurance that can indemnify the loss of planetary boundaries, the tipping points of Earth systems. Dr. Louise Pryor, a former President of the Institute and Faculty of Actuaries (IFoA), “examines the insurance industry’s underutilised power to influence fossil fuel companies, rather than succumb to their influence. Just 111 producers are responsible for trillions of dollars in damages from extreme weather events, which results in major losses for the insurance industry,” says Dr. Pryor.
Could we be caught barking up the wrong tree? It is not decarbonisation, silly! Dr. Howard Dryden has the answer: Aren’t we ignoring our oceans? The most critical of climate regulators.
According to Aon, natural disasters caused $368 billion in global economic losses last year, the ninth year in a row losses topped $300 billion. Forty per cent of those were insured. The protection gap is widening. As insurers retreat from high-risk regions, where is the insurer of last resort?
Insurers clinging to linear models and silos created by the Industrial Revolution mindset – of ignoring externalities – could do little good. The challenge is not decarbonisation alone. As Dr. Dryden explains, there is ocean biodiversity and pollution to be urgently and seriously mindful of. Having already initiated significant harm, mitigation alone will do no good. We need adaptation and resilience to cope with the push back from nature.
Our relentless extraction of natural resources have led us to alarm bells by Earth systems. The AMOC is under the close scrutiny of eminent scientists. A slowing or stalled AMOC can seriously hamper life on Earth. Meanwhile, the Southern Ocean is changing drastically as sea ice cover reduces and the upper ocean becomes saltier. This is also likely to have unprecedented global climate impacts.
Quasi Resonant Amplification (QRA) happens when planetary waves within the jet stream become amplified and, crucially, get stuck in place. They stall, essentially, creating a weather pattern that gets locked over a region for an extended period. New research led by Dr. Michael Mann links a surge in stalled jet stream events to human-driven climate change, with major implications for future heatwaves, wildfires, and floods.
Can any form or scale of disaster capitalism provide protection against forces beginning to be unleashed? The bottom trawling, deep-sea mining, the high sea assault on cetaceans, the decimation of our rainforests and biodiversity, and pollution at the high seas, to name a few – have begun to deliver far flung spectacles to the nearest neighbourhood. With increasing frequency and ferocity.
A risk transfer we were not prepared for. And now, as insurers of last resort. The chickens are coming home to roost.
Praveen Gupta is a former insurance CEO. He believes insurers have a critical and urgent role to play in nurturing our environment. Europe-based ‘illuminem’, which has emerged as the world’s largest and premier expert network in sustainability, adjudged Praveen as “Most read in Climate Change 2024”.
