Summary of the GAO's Report on Climate Change and Insurance Risk

C2ES's Summary of GAO Report, Climate Change: Financial Risks to Federal and Private Insurers in Coming Decades are Potentially Significant.

The Government Accountability Office (GAO), Congress’ investigative arm, is warning of billions of dollars in possible damage claims that two federal insurance programs may face as a result of climate change related storms and floods. The report—Climate Change: Financial Risks to Federal and Private Insurers in Coming Decades are Potentially Significant—was developed at the request of Senators Lieberman and Collins, Chairman and Ranking member of the Senate’s Homeland Security and Government Affairs Committee. The Senators released the report at a hearing they held on the same topic on April 19, 2007. GAO was asked by the Senators to (1) describe how climate change may affect future weather-related losses, (2) determine past insured weather related losses, and (3) determine what major private insurers and federal insurers are doing to prepare for potential increases in such losses. The report found that large private insurers are incorporating climate change into their annual risk management practices, and some are addressing it strategically by assessing its potential long-term industry-wide impacts. The two major federal insurance programs, however, have done little to develop comparable information. GAO is recommending that the Secretaries of Agriculture and Homeland Security analyze the potential long-term fiscal implications of climate change for the FCIC and the NFIP, respectively, and report their findings to the Congress.

Senator Lieberman stated that this report “presents another strong argument—this one fiscal—for adopting an economy-wide, cap and trade, anti-global-warming law."[1]

Read the Full Report (pdf).

[1]Fialka, John. “Warming Taxes U.S. Agencies: Flood, Crop Programs Haven’t Limited Risks; Panel is Tougher on CO2.Wall Street Journal, 19 April 2007