Fossil Fuels: An Emerging Insurance Crisis

The ongoing climate changes and increasing plastic waste are introducing new legal challenges for industries.

Heatwaves, fungal growth due to heat, and plastic contamination are presenting novel threats to businesses and their insurers, as highlighted by a recent report from reinsurer Swiss Re. What links these issues is the exacerbating role of fossil fuels.

Fossil fuel usage contributes significantly to the emissions of greenhouse gases that drive global warming and is also a fundamental component in plastic production. According to Swiss Re's latest annual report, these factors pose evolving threats with potentially immense impacts on both society and industry.

As heatwaves grow longer and more intense, the consequences on human health, economic structures, essential services, farming, and medical care require urgent attention, stated Jérôme Haegeli, Swiss Re’s chief economist, in a commentary accompanying the report.

Intensifying Temperatures

Man-made climate phenomena are making temperature rises a signature occurrence. 2024 surpassed 2023 as the hottest recorded year, and experts anticipate it will not hold this title for long. During heatwaves, the parched vegetation heightens wildfire risks while increased energy demand stresses power infrastructure, leading to potential shortages and outages. These scenarios significantly raise property insurance claims.

Similarly, heat-exacerbated medical conditions increase claims across healthcare and workplace insurance sectors. Since the turn of the millennium, the U.S. has seen more frequent summer power outages. Interestingly, heat is the most lethal weather phenomenon, surpassing hurricanes, tornadoes, and other natural disasters in fatality rates. Insurers face amplified home insurance costs due to the growing magnitude of wildfires, especially in the western regions, prompting some providers to withdraw from states like California.

Growth of Heat-Loving Fungi

Fungi have adapted to thrive in escalating temperatures, the report outlines. Toxic mold claims are expected to rise, particularly in humid and warm buildings. This challenge extends to agriculture, where mold proliferation threatens crops, compounded by the overuse of fungicides potentially fostering resistant fungi.

Plastic Pollution: A Rising Concern

Swiss Re's analysis notes the substantial environmental and health troubles plastics pose. Conservationists liken the continuous infiltration of plastic debris into oceans to an ongoing oil spill. What's alarming is the still unclear impact of microplastics on human health. These minuscule particles have been detected in food, and even in infants' biological samples, suggesting a wider exposure than currently acknowledged.

Plastic waste might soon prompt a fresh surge of legal claims, warns Swiss Re. California initiated litigation against ExxonMobil concerning such pollution, with other states following suit against fossil fuel entities for their contribution to climate change. Should scientific links between microplastics and specific health issues emerge, it could trigger new liability cases.

Furthermore, the comprehensive report delves into additional emerging threats, such as fraud using deepfakes, the risks of ultra-processed foods, and implications of AI in medicine. The aim is to equip businesses with strategies for managing these burgeoning risks.

Effectively addressing climate change and curbing plastic pollution calls for confronting their root — the pervasive use of fossil fuels.