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Scientists have been talking about global warming for decades. But Hurricanes Katrina and Rita have significantly raised the profile of the discussion and the insurance industry is starting to pay attention.

Global warming heats up insurance industry

Two weeks ago, Hurricane Katrina was officially declared the most destructive storm ever to hit the United States, its toll in human lives already having reached several hundred and property damage expected to exceed $100 billion. A week before that, however, came the equally disturbing news of a study warning that Katrina might just be the start of a new era in which global climate changes bring ever-increasing losses that threaten the fiscal health of the insurance industry and place greater strain on federal, state and local governments. While some insurance industry officials dispute that dire prediction, a growing number of institutional investors and state regulators -- who needed no further convincing after Hurricane Rita slammed into the Gulf Coast -- are urging insurers to take action. Some are even calling for the adoption of a national catastrophe insurance plan.

The study, commissioned by Ceres, a national coalition of investment and environmental groups that helps companies address sustainability challenges like climate change, looked at insurance losses in the U.S. over the past three decades from catastrophic weather events -- those resulting in over $1 billion in damages (adjusted for inflation) -- including not just hurricanes, but also other severe weather-related phenomena like floods, hailstorms, wildfires, droughts and heat waves. What the study found was that losses from such weather catastrophes have risen precipitously -- from an average of a few billion dollars per year in the 1970s (in current dollars) to about $15 billion a year over the past decade.

The main force driving that unfavorable trend, according to a report on the study's findings released Sept. 8, is rising "land and sea temperatures" due to the "build-up of gases like carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons caused by fossil-fuel burning, industrial activity, certain agricultural practices, and deforestation," or global warming, for short. The report, entitled "Availability and Affordability of Insurance Under Climate Change -- A Growing Challenge for the U.S.," goes on to say that "if trends persist, the impacts of climate change...will inevitably result in more insurance claims and increased costs."

The report was authored by a trio of experts: Dr. Evan Mills, a scientist with the U.S. Department of Energy's Lawrence Berkeley National Laboratory; Richard Roth Jr., the chief property and casualty actuary for CALIFORNIA's Department of Insurance for 20 years and the agency's assistant commissioner from 1984 to 1990, who now works for one of the world's leading actuarial consulting firms; and Eugene Lecomte, President Emeritus of the Institute for Business and Home Safety in Boston, MASSACHUSETTS, and a 50-year veteran of the insurance industry.

Still, some question the researchers' assertion that the insurance industry is threatened by global warming. "The debate over global warming is misplaced," said David Snyder, a vice president of the American Insurance Association. "The science is somewhat contradictory over the...issue."

Indeed, one of the other prevailing views in the scientific community regarding Katrina and Rita is that they are merely part of a natural period of elevated hurricane activity. "What people have to realize is that we're in a part of an active long-term cycle in hurricane activity," says Stanley Goldenberg, a meteorologist at the National Oceanic and Atmospheric Administration. "What happens is that you have several decades of below normal activity, and then you have several decades of above normal activity...Since 1995, we've been in this higher cycle of activity."

Others have been a little less diplomatic about the subject. "The notion of manmade global warming is junk science," said Steve Milloy of Action Fund Management LLC, an investment consulting firm. In Milloy's view, when it comes to hurricanes, "Insurance companies aren't financially exposed because of any supposed global warming. They're exposed because they've spent decades writing policies for risky coastal development and not charging sufficiently high premiums."

That is a view which is shared by Kerry Emanuel, a hurricane researcher at the Massachusetts Institute of Technology. In the aftermath of Katrina, Emanuel wrote that as bad a hurricane as it was, it wasn't unprecedented. The real problem, he says, is "the headlong rush to tropical coastlines, coupled with federal and state policies that subsidize the risk incurred by coastal development...We are subsidizing risky behavior and should not be surprised at the result." The authors of the Ceres report also acknowledge the human component of the problem -- albeit without giving any ground on their position regarding global warming -- stating that "demographic and socioeconomic trends, such as the tendency for people to move to high-risk areas, will further compound the impacts" of severe weather events.

The researchers' claim that the insurance industry has become financially stretched seems to be less open to dispute. In making that argument, the authors point, for example, to TEXAS, where skyrocketing water-related mold claims -- which reached $3 billion in 2002 -- led dozens of insurers to stop writing or renewing homeowners policies, while companies that continued to offer coverage doubled their premiums and providers in states across the country added mold exclusions to their policies. The report also cites the case of FLORIDA, where a series of hurricanes last year drove seven private insurers out of the business of insuring homes -- even after they'd been granted the authority to substantially increase their rates -- and where a new state-run company is now the second-largest insurance provider.

As troubling as those developments are, the report goes on to make the point that while insurers have raised their premiums and added restrictions to their coverage, they haven't come anywhere close to keeping pace with the growth rate of weather-related losses. In fact, the report states that, since 1971, those losses have risen 10 times faster than premiums. And if global climate trends continue, the researchers warn, private insurance will become less affordable and harder to find, and state and federal governments will increasingly be called upon to serve as "insurers of last resort."

That prognosis is evidently alarming enough to worry some institutional investors. Jack Ehnes, chief executive officer of one of the nation's largest pension funds, the California Teachers' Retirement System (CalSTRS), said, "Investors are increasingly more concerned about the financial risks posed by climate change and our interest is especially strong for an industry that is so directly exposed to the physical impacts of global warming. Insurers must take active steps to understand and assess these daunting tasks."

Ceres' findings have also drawn the attention of state insurance officials. Joel Ario, OREGON's top insurance administrator and the vice president of the National Association of Insurance Commissioners, said the Ceres report makes it pretty clear that insurers haven't done enough to assess their risks from climate change. "Insurers need to be able to anticipate losses. If there continue to be surprising losses, eventually we are going to have solvency issues," he said.

In an effort to avoid that eventuality, regulators from all over the U.S. will meet next month in CALIFORNIA to talk over the idea of a national insurance plan for dealing with terrorist attacks and natural disasters. "The ultimate toll of Hurricane Katrina will be unimaginable in both loss of human life and financial ruin," said California Insurance Commissioner John Garamendi, who will host the two-day summit. "As insurers begin to sort through a deluge of claims, and survivors confront the fact that some losses won't be covered, it will become painfully clear that a single national policy is the only answer." (USA TODAY, CERES.ORG, SACRAMENTO BEE, PR WEB, MSNBC.COM, INSURANCE NEWS NET)

-- Compiled by KOREY CLARK

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Bird's eye view

More states adding high school exit exam

Requiring high school seniors to pass a test to earn a diploma - regardless of how well they did in their classes - is a growing trend in state education reform. According to a recent report from the Center on Education Policy, a Washington D.C.-based education advocacy group, 19 states currently have such an exam, and withhold diplomas from kids who do not pass. That is down from the 20 states with such standards in 2004, because MARYLAND is transitioning to a new type of test and will not return to its no-pass, no-diploma standards until 2009. But the figure will continue to grow, as 26 states - representing 72 percent of the student population -  will have mandatory exit exams by 2012. The accompanying map shows both the 19 states that already have exit exams and the seven that will phase them in over the next five years. 
 

-- By RICH EHISEN

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Budget & taxes

LOUISIANA SEEKS TO CASH IN ON KATRINA: A couple of weeks ago, LOUISIANA's congressional delegation unveiled its plan for rebuilding the state in the aftermath of Hurricane Katrina. That plan consisted of a 440-page bill that called for a staggering $250 billion in federal funding, including $40 billion for projects to be carried out by the Army Corps of Engineers. It didn't take long for the proposal to generate critics, who grumbled that the $40 billion Corps request was about 10 times the annual Corps budget for the whole country, that the $250 billion total price tag was more than the Jefferson administration had spent on the Louisiana Purchase (adjusted for inflation), and that the plan included projects that have nothing to do with hurricane protection, such as an expansion of the Port of Iberia to accommodate oil and gas tankers. Steve Ellis of Taxpayers for Common Sense said, "This bill boggles the mind. Brazen doesn't begin to describe it. The Louisiana delegation is using Katrina as an excuse to resurrect a laundry list of pork projects." While the Louisiana delegates have referred to their bill as a beginning point for discussions, they appear to be ready to defend it. "We're going to fight for every dollar," said U.S. Sen. Mary Landrieu (D-Louisiana). (WASHINGTON POST)

HIGH COURT WILL WEIGH TAX INCENTIVES: The U.S. Supreme Court announced last week that it will decide whether to uphold a lower court decision declaring that a manufacturing tax credit used to lure a DaimlerChrysler jeep assembly plant to OHIO violated the U.S. Constitution's commerce clause. The 6th U.S. Circuit Court of Appeals ruled in September, 2004 that by offering a break to DaimlerChrysler, while giving no breaks to companies that invested in other states, Ohio government officials had interfered with interstate commerce. The high court's decision to take up the case has major implications not only for Ohio -- where companies have claimed the manufacturing tax credit 16,000 times since 1995 -- and the three other states that fall under the 6th Circuit's jurisdiction, MICHIGAN, TENNESSEE and KENTUCKY, but also for the 36 others across the nation that commonly use such incentives to attract business. Some see that decision as an indication that the 6th Circuit's ruling will be overturned. (TOLEDO BLADE, LINCOLN JOURNAL STAR)

BUDGETS IN BRIEF: ILLINOIS Gov. Rod Blagojevich (D) has freed up $195 million in funding for so-called "pork" projects that he froze after taking office in January, 2003. Administration officials said the sudden decision to release the money was motivated by the need to honor contracts the state had made and had nothing to do with Blagojevich's decision to seek re-election next year (DAILY HERALD [ARLINGTON], CHICAGO TRIBUNE). * Legislative leaders from MISSISSIPPI's coastal region reached a tentative agreement last week to seek a change in state law that would allow casinos to be built on land within 800 feet of where gambling barges are currently permitted. Observers say that consensus is crucial for the coastal representatives to have any chance of persuading legislators from the rest of the state -- currently assembled for a special session on Katrina relief -- to approve the change (SUN HERALD [BILOXI]). * Supporters of a proposed constitutional amendment to limit state spending in KANSAS launched a 23-city tour of the state last week. They are hoping to generate enough support to get their Taxpayer's Bill of Rights through the Legislature and onto the ballot in November, 2006 (ASSOCIATED PRESS, KANSAS CITY STAR, WICHITA EAGLE).
 

-- Compiled by KOREY CLARK

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Politics & leadership

REDISTRICTING REFORM REVOLUTION: This fall, voters in CALIFORNIA and OHIO will decide whether to take the power to draw political districts away from the lawmakers who have the most to gain -- or lose -- from the way those boundaries are laid out. And activists are working busily to give voters that same opportunity in more than a dozen other states. On top of those "grass roots" efforts, bills seeking to establish bipartisan or independent redistricting commissions were introduced in 12 state legislatures this year, and a TENNESSEE Congressman introduced legislation mandating redistricting by independent commission in every state. To the growing ranks of redistricting reformers, the foundation of democracy is at stake. "To some extent, the power to draw lines is more important than the power of voting," says Nathaniel Persily, a professor of law and political science at the University of Pennsylvania. "The redistricting process is often more determinative of who wins elections than the voting in elections itself." The reformers say the traditional practice of allowing the majority party to control the redistricting process -- which inevitably results in districts that favor that party's candidates -- has diminished the significance of general elections. And the 2004 elections, they say, bear that out: Not one of the 153 congressional and legislative seats contested in California changed parties. Neither did any of the congressional seats in Ohio. And in 72 percent of the legislative races in FLORIDA, and nearly half of those in MASSACHUSETTS, the candidate of the favored party in any given district faced no partisan opposition at all. "Sort of like the Politburo," said Pamela H. Wilmot, executive director of the Massachusetts branch of Common Cause, adding, "You can imagine that that has some pretty dire consequences to political accountability." Moreover, reform proponents say that by shifting the real battle for political office to the primaries -- in which the most liberal Democrats and most conservative Republicans tend to prevail -- partisan redistricting has polarized legislatures. "We wonder why we're electing Democrats and Republicans who seem to be more extreme than the average Democrat or Republican, and when they get to the statehouse, they don't seem to talk to one another," says Ohio State University political science professor Herb Asher. The redistricting reform movement isn't a particularly new development; groups like Common Cause have been leading it since the 1970s. But some political scientists say the movement has been given new impetus by recent developments in TEXAS and GEORGIA. There, in major court battles, Republican lawmakers won the right to redraw their states' district maps a second time in the same 10-year period, ending a century-old tradition. And those rulings helped the GOP retain control of the U.S. House of Representatives. (LOS ANGELES TIMES)

HIGH COURT TO TAKE ON CAMPAIGN FINANCE: The U.S. Supreme Court agreed last week to hear a pair of challenges to federal and state campaign finance laws. The first case, which originated in WISCONSIN, disputes provisions of the 2002 federal campaign finance law, known as the McCain-Feingold act, imposing restrictions on political advertising close to an election. The anti-abortion group that filed the case claims those provisions should not apply to the series of ads it aired last year in support of President Bush's judicial nominees because they were not the sort of "sham" issue ads -- attacks on specific candidates designed as issue ads -- that the law was intended to regulate. The second case, actually a consolidation of three cases, challenges a 1997 VERMONT law limiting the amount of money candidates for statewide office can spend -- the only such law in the nation. Vermont's Republican party contends that law violates their constitutional right to free speech. The two cases will offer the high court its first chance to revisit the major constitutional issues of campaign law since ruling to uphold McCain-Feingold in 2003. That was a 5-4 decision. And one of the dissenters was the late Chief Justice William  Rehnquist. The views of his replacement, federal Appeals Judge John Roberts, on the subject are unknown. Meanwhile, retiring Justice Sandra Day O'Connor, voted to uphold the law. And, as of press time, President Bush had not yet nominated her replacement. (WASHINGTON POST, MILWAUKEE  JOURNAL-SENTINAL)

POLITICS IN BRIEF: Last Wednesday, a TEXAS grand jury charged U.S. Rep. Tom DeLay (R-Texas) with criminal conspiracy, forcing the House majority leader to temporarily give up his post. Republican congressional officials said Rep. David Dreier (R-CALIFORNIA) and GOP whip Rep. Roy Blunt (R-MISSOURI) would likely take over DeLay's duties (CNN.COM). * Supporters of COLORADO's November budget-reform ballot measures -- Referendums C and D, suspending TABOR and authorizing funding for transportation projects, respectively -- have raised $2 million, eight times more money than opponents have taken in (DENVER POST). * VIRGINIA Democratic Party Chairman C. Richard Cranwell accused the Republican National Committee last week of attempting to suppress Democratic voter turnout in this fall's election. Cranwell claimed the RNC was calling Democratic voters and informing them they were not properly registered to vote. An RNC spokesman said that calls had, in fact, been made to "discerning Democrats," but he contended the calls were intended only to spur participation in the political process (VIRGINIAN-PILOT [NORFOLK]). * A spokesman for CONNECTICUT Gov. M. Jodi Rell (R) said last Tuesday that she is "seriously considering" calling a special session to address campaign finance reform. According to the spokesman, Rell is currently reviewing a framework for limiting the influence of special interests on political campaigns which was prepared by a legislative working group she formed (ASSOCIATED PRESS, WATERBURY REPUBLICAN-AMERICAN). * MINNESOTA Gov. Tim Pawlenty (R) took the unusual step last week of sending a "menu" of potential special session issues to legislative leaders to help him decide whether to convene a session this fall. The governor said if no menu items got the support of all four leaders, he wouldn't call lawmakers back to St. Paul before the start of the regular session on March 1. The unorthodox approach didn't go over too well with the DFLers; Senate Majority Leader Dean Johnson said it made Pawlenty seem more like a waiter than a leader (MINNEAPOLIS STAR-TRIBUNE). A white TENNESSEE lawmaker upbraided the state's Black Legislative Caucus for being less accommodating than the Ku Klux Klan, after the group rebuffed his request to allow him to become a member. "My understanding is that the KKK doesn't even ban members by race," said freshman Rep. Stacey Campfield (R). The chairman of the Caucus, Rep. Johnny Shaw (D), said Campfield is a "strange guy" who just wants to make trouble (ASSOCIATED PRESS, ABC NEWS).
 

-- Compiled by KOREY CLARK

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State Net Capitol Journal Editor Rich Ehisen is on vacation. This column will return the week of October 24, 2005.

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UPCOMING STORIES   Reigning in the "Third House": the effort to regulate lobbying Bear of a problem: de-listing the grizzly TEXAS telcos get free pass into cable; will other states follow?  And many more... TOP OF PAGE

State Net Capitol Journal Editor Rich Ehisen is on vacation. This column will return the week of October 24, 2005. TOP OF PAGE

 

UPCOMING ELECTIONS (09/29/2005 - 10/20/2005) 10/04/2005  California  Special Primary     US House (Cox 48) 10/04/2005  South Carolina  Special Election     House  024 10/11/2005  Mississippi  runoff if needed     House  086  TOP OF PAGE

Once around the statehouse lightly

THE HIGH COST OF JUSTICE: Everyone knows that justice doesn't come cheap, but in PENNSYLVANIA the price is a tad higher thanks to expense accounts maintained by the seven members of the state Supreme Court. According to The Associated Press, Keystone taxpayers forked over $164,000 last year to buy food, travel and lodging for their exalted jurists. Included among those expenses was an $85 bottle of wine and a $1,766 picture frame. One judge charged the state for 34 car washes. Justice Max Baer -- no relation to either the heavyweight champ or Jethro Clampett -- warned that he can't let a dinner partner foot the bill in the off chance that the companion might some day have a case before the court. And, the car wash?

FIRST, BUT FOR WHAT? The name of the group is OHIO First, and it was formed by conservatives and Republicans to oppose a Democratic effort to rewrite the state's election laws. But as the Toledo Blade reports, the group ran into a snag when trying to gin up an Internet site. Seems a foe -- Reform Ohio Now, which sponsored the reform package -- owns the rights to ohiofirst.org. And it's cluttered the site with a photo of Republican Gov. Bob Taft and the Sammy Davis Jr. tune, "Don't do the crime if you can't do the time." Ohio First will have to find a different URL, which its spokesman agrees will be a drag. Meanwhile, Reform Ohio Now also points out what it considers an ironically unfortunate decision -- Ohio First incorporated in Delaware, an error in judgment that a spokesman says has now been corrected.

CITY OF BROAD...NANNIES? If its City Council has its way, you won't want to refer to Chicago as having "broad shoulders" anymore. In fact, notes the Chicago Sun Times, the ILLINOIS metropolis could very well become the nation's most intolerant nanny. One alderman wants a dress code for Windy City cab drivers, requiring them to wear white collared shirts, slacks, socks and -- this one goes too far -- matching shoes. The shoes must be black, khaki or navy blue. No brown shoes? Another alderman wants to ban Chicago restaurants from serving foie gras. That's rich-folk food made from duck or geese liver, and animal-rights activists want it outlawed because the fowl are force-fed to enlarge their livers. Mayor Richard Daley thinks both ideas are bonkers. "If we keep moving down this path," he grouses, "we'll have to have everyone have a hand-held computer to figure out" what they can do in Chicago.

NEW DIGS: Historic significance is like a religion in the South, where every fog bank reminds Sons of the Confederacy about Sherman's March to the Sea. But senators in NORTH CAROLINA were getting mighty depressed trudging around inside their "historic" surroundings. That's because the Senate chamber hadn't been renovated in 42 years. The red carpet was threadbare, desks and chairs were shabby and the whole place looked as though Sherman had recently departed. So, reports the Charlotte News and Observer, the state is undertaking a $1.8 million re-do that is expected to be ready when the Senate convenes next May. The only questionable purchase is a new Senate coat of arms. The Tar Heel State is home to some of the world's finest wood carvers, yet the renovation committee commissioned this one in Europe. 

LUDDITE OF THE WEEK: The honor goes to UTAH Gov. Jon Huntsman Jr. A staunch advocate for his state's high-tech industry, Huntsman -- reports the Salt Lake Tribune -- never uses e-mail. Instead, the Republican chief executive hand writes his messages on note cards. Not the most efficient way to communicate in the electronic age, he admits, but at least no one can eavesdrop or sue his office for the e-mail trail. Of course, Beehive State archivists are a little concerned with the governor's throwback habits. Apparently, Huntsman doesn't have the best handwriting, and officials fret about keeping an accurate record of his administration.
 

-- By A.G. BLOCK

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Editor: Rich Ehisen
Associate Editor: Korey Clark
Contributing Editor: A.G. Block
Editorial Advisor: Lou Cannon 
Correspondents: Richard Cox (CA), Steve Karas (CA), 
Bruce McKeeman (CA), Linda Mendenhall (IL), 
Lauren King (MA) and Ben Livingood (PA) 
Design: Richard Hansen, Heather Conway 

Copyright 2005 State Net
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