Will Global Warming Cool off Weather Underwriting?

By Mollin, Harold | Risk Management, March 1993 | Go to article overview

Will Global Warming Cool off Weather Underwriting?


Mollin, Harold, Risk Management


IN RECENT YEARS, THE SCIENTIFIC COMMUNITY has been locked in debate over the theory of global warming and its supposed far-reaching environmental effects. Ever since the term "greenhouse effect" came into popular use, certain scientists have made dire predictions about the earth's future. In turn, these predictions have prompted the weather underwriting industry to evaluate just how much impact, if any, a global warming trend would have on its business and the corporate community.

A worldwide global warming trend could have an effect on many companies, particularly those in the tourism, agriculture and chemical industries; for example, global warming could lead to droughts or windstorms, which would pose significant threats to agricultural concerns. Additionally, a gradual warming could hamper the profits of public utilities, particularly those that derive their profits from providing gas and oil heating in the winter. The tourism and resort industries could also suffer from increases in temperature as, for example, in the case of ski resorts, which depend on adequate snowfalls. As a result, insurers and risk managers of many large organizations are closely examining the relevant scientific data; if scientists are correct who assert that the earth will warm by between 3 to 10 degrees Fahrenheit by the year 2050, then the health and survival of many industries may be in jeopardy.

However, the jury is still very much out on the global warming controversy. At present, there is significant debate between nearly equal numbers of the scientific community on at least two key points: first, whether results of climatological studies that imply global warming is occurring are true and based on sound data, and second, if global warming is occurring and the data are accurate, whether or not this warming is largely due to human industry. As a result, risk managers will find that the supposed global warming trends do not presently pose a definitive and clear-cut threat to manufacturing, agriculture or any other business activities.

THE THEORY OF GLOBAL WARMING

In order to understand the global warming issue, it is important to take a look at the greenhouse effect. National Geographic reports that the term was coined by the French mathematician Jean Fourier in 1822, who likened the earth's atmosphere to the glass of a greenhouse. The magazine reports that the greenhouse effect, a natural phenomenon, occurs when the sun's radiation passes through the atmosphere to the earth's surface and is absorbed by both land and water masses. The planet's surface then radiates the heat back into the atmosphere where water vapor and gasses such as carbon dioxide absorb some of the heat; the rest of this radiation, equalling about one-third of the solar energy reaching the earth, is radiated back into space. Without the greenhouse effect, the earth would have an average temperature of O degrees Kelvin, or -273 degrees Fahrenheit, instead of its current average temperature of 59 degrees Fahrenheit.

However, in recent years some scientists have observed that since the beginning of the industrial revolution, the burning of fossil fuels and forests has released large quantities of carbon dioxide, methane, chlorofluorocarbons (CFCs) and nitrous oxide into the earth's atmosphere. Sarah L. Clark, author of the Environmental Defense Fund's "Fight Global Warming," reports that measurements of atmospheric carbon dioxide in 1958 revealed a 315 ppmv (parts per million, by volume) concentration; measurements conducted in 1990 revealed an atmospheric content of 353 ppmv, representing a 12 percent increase over that 32-year period. Ms. Clark also reports that levels of methane in the atmosphere have doubled since the dawn of the industrial age. In addition, scientists have demonstrated that CFCs are 20,000 times more effective at absorbing the heat the earth radiates than carbon dioxide. Finally, nitrous oxide, also known as laughing gas, grew in atmospheric content by 3. …

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