NEW YORK (TheStreet) -- Both sides embroiled in the political debate over climate change will find proof for their positions in data collected by the insurance industry. But don't expect the industry itself to weigh in.
In a phone interview, Dr. Robert Hartwig, president of the Insurance Information Institute, emphasized that the insurance industry as a whole is satisfied to let the scientific community estimate the realities of climate change and the possible influence of man-made greenhouse gasses. While insurers have an obvious stake in science's findings, agreeing or disagreeing with any particular theory isn't the job of an insurer.
"From an insurance perspective, irrespective of the debate, we place our chips on the actual hard data that we see from actual claim activity all around the world," Hartwig said, emphasizing the projection of trends in the frequency of insurance claims and the cost of those claims. "The cause of that trend is less important than the trend itself."
The longevity of insurance companies depends not on speculation about causes but on accurately predicting those trends.
"The fact that the climate is variable and volatile is nothing new," he said, noting that some insurance companies have been around for 200 years. While part of health insurer Cigna dates back to the 18th century, among the oldest in the property and casualty sector are Athens, Ga.,-based Southern Mutual, founded 1847, and Maryland-based Hartford Mutual, dating back to 1842.
"Every insurer in business today has long since learned how to adapt to oftentimes extreme variability in the climate," Hartwig said.
In the historical analysis, changing demographics play a key role. One of the reasons hurricanes, wildfires and tornados are more devastating in recent decades is more people live in the areas where they occur.
"There was a very severe hurricane in 1926 in Miami -- not very many people lived there, but what would happen if that were to happen today?" Hartwig said. "All of those analyses are done to project expected costs."
It is partly the demographic variable that makes data from the insurance industry as a whole such a dubious source for those that would argue a political position on climate change. Tracking the cost of damages from natural disasters in any region over a century would appear to bolster the case for climate change: A greater number of people on the planet leads to greater damages and higher costs from storms. Meanwhile, data measuring the frequency and severity of such disasters may or may not not support the same conclusion.
But demographics aren't the whole story. Hartwig had no qualms about stating that violent weather activity has increased in recent years.
"There are certainly more [severe weather] events in the U.S. and maybe even globally," he said, adding that the rise in thunderstorm-related damage -- caused by what are termed "convective events" -- has been particularly dramatic.
"The largest insured loss in the world was a convective event last year, a hail storm in Germany," he said.
According to reinsurance giant Munich Re, losses from violent hailstorms that struck Germany in July and August of 2013 generated total claims of $4.1 billion. Like more severe hurricanes, thunderstorm activity can be exacerbated by more moisture in the air. Increased moisture, in turn, can be caused by an increase in ocean temperature.
How much mankind has contributed to such increases in severe weather activity is a completely different point, Hartwig said. Insurers note weather event cycles not just from year to year but stretching out for decades and beyond, forming cycles within cycles. The polar vortex that chilled the United States recently is a known cycle that should occur on the order of roughly every 20 years and its severity may or may not be influenced by other factors.
According to Munich Re, winter storms caused $1.9 billion in insured losses during 2013, up dramatically from $38 million in 2012. According to Property Claim Services, the annual average for winter storm damage is about $1 billion.
"Larger scale cooling events happen on the scale of centuries. Even larger scale events happen on the scale of millennia," Hartwig said.
This pragmatic focus on projecting trends from historical claims data, apart from any cause, allows the industry to remain prepared, while staying above the politics of climate change.
But that doesn't mean insurers reject the science. On the contrary, the progress of scientific research and models are followed very closely.
"The insurance industry will listen and use the science from this research," Hartwig said. Technology is making predictions of weather and other natural phenomenon much more reliable, and the potential there is growing. Citing "the exponential increase in computer power and the exponential decrease in storage costs," Hartwig sees the potential for science to create ever more accurate models that will be used by the industry.
Accepting the work of scientists or the global warming findings of groups like the U.N.'s Intergovernmental Panel on Climate Change, "Insurers are going to be the end users of determinations made experts around the world," he said.
Climate change deniers often point to debate within the scientific community as proof that the science can't be trusted. On the contrary, insurers agree with scientists who see uncertainty as a necessary part of the process, pushing findings toward greater reliability. What the industry knows of large-scale cycles, in fact, comes from accepted scientific research.
"There are always scientific debates in these areas -- there are scientific debates about earthquakes for example," Hartwig said. "They don't give rise to the same passion. It doesn't mean scientific debate is gone."
North Atlantic hurricanes are an area of intense interest in the insurance industry, in part because the scientific evidence is not yet conclusive. While tornados in the U.S. and convective events globally are on the rise, hurricanes in the North Atlantic seem to have reduced in frequency, Hartwig noted, even as the severity of hurricanes appears to have increased.
A growing number of people living in the coastal areas likewise means greater loss of life and more property damage when a hurricane, large or small, makes landfall. And that makes the scientific research being done and the trends in the historic data all the more important.
Ranking total damages from hurricanes, the top five all occurred over the last 10 years. Sandy, which made landfall as a post-tropical cyclone (at its peak, at sea, it was a Category 3 hurricane), was the deadliest windstorm to have occurred in the Northeastern United States in 40 years, resulting in more than 280 fatalities. Munich Re put insured losses attributed to Sandy at $25 billion and total losses at $50 billion.
Travelers (TRV), Allstate (ALL) and Chubb (CB) are three major insurers who had significant exposure to damage from Superstorm Sandy. Travelers reported 2012 total catastrophe claims were $1.9 billion pre-tax, amounting to the fourth year out of five for such extraordinary losses.
In a recent survey, Ceres, a sustainability advocacy group, found 23 out of 184 insurance companies had "comprehensive climate change strategies" in place. Clearly that's a low number and indicative of the industry's avoidance of speculative interpretations of observed severe weather trends. Yet it is also a sign that the topic of climate change is gaining momentum among U.S. insurers as an organizing principle.
The industry adjusts pricing of products according to claims trends and the best scientific evidence. It is, in fact, obligated by law to make sure its rates are fair and based on verifiable trends. As the science coalesces, the industry naturally follows suit.
With regard to North Atlantic hurricanes in particular, Hartwig said, "there's a lot of science that needs to be done," he said.
-- Written by Carlton Wilkinson in New York and Asbury Park, N.J.