What is happening with the climate should demonstrate to all those who still doubt that the economy, finance, geopolitics and politics will soon be profoundly disrupted, and much more quickly than we think. This will first be seen in the reaction of those whose job it is to measure in monetary values the most distant and least likely consequences of each of our actions: the insurance companies.
For at least three thousand years (the first ones date back to the Egyptian and Chinese shipowners), people have understood that a financial value had to be attributed to the recurrent risk of a shipwreck, and that it had to be covered by a premium, so that the total of the premiums paid by those who escaped it would be used to finance the damages of the rare victims, with a profit for the insurer himself.
This principle, which has worked very well, has invaded a very large number of activities: people are now insured against all sorts of risks: car accidents, illness, death, cancellations, failed exams, refusal of credit. Some of these insurances have remained optional; others have become compulsory. In many countries, some of the more onerous ones have been transferred to the state, and insurance premiums have become social contributions or taxes, which changes nothing except that they vary with the income of the insured person, who has become a taxpayer. So much so that today we do not realise that a large proportion of taxes are simply compulsory insurance premiums to protect against the innumerable threats that lurk around a community.
In many areas, these premiums have driven the development of prevention, to reduce the occurrence of disasters. For example, they have played a considerable role as a tax in improving policing and defence, and as an insurance premium in motor vehicle safety. And they are beginning to push for the development of preventive health care. This allows the market to claim that it is regulating the long-term threats created by its own activities. And that insurance premiums will be enough to protect us from all the dangers of the future. In particular, some claim that this will happen in the environmental field:
Faced with the countless agricultural losses and destruction caused by storms, hailstorms, fires, tornadoes, and droughts, insurance companies will have to pay out increasingly large sums, in addition to what governments will have to pay out. And insurance companies will soon have to raise premiums massively, just as governments will have to raise taxes. In fact, agricultural disaster insurance premiums have already increased by an average of 25% and in some specific areas by more than 50%. Many explain that these increases will lead economic agents to integrate the costs of future damage into the prices of current goods and to take the best decisions as soon as possible to reduce the sources of damage. And they explain that the market, supplemented by insurance, will be enough to reorient the economy towards a sustainable model and to control climate disorders. But this will not work:
Firstly, because the insured are generally the victims, and not those responsible for the root causes of climate disruption; yet insurance only has a positive effect if it leads those responsible to change their behaviour; it is therefore the greenhouse gas emitters who should pay the highest insurance premiums. Secondly, because the damage will become so great and affect so many people that it will be uninsurable and no amount of premiums could cover the costs. Finally, because many people will no longer be able to afford them and will take the risk of not being insured.
All in all, the market, even if supplemented by insurance, will never be able to react fast enough and deeply enough to prevent the disaster that has just begun. And we cannot rely on insurers alone to redirect the economy towards sustainable sectors, towards the life economy. Neither the market nor the insurers, which are the most sophisticated form of futures markets, will replace the role that politics must play, and which it so cowardly refuses everywhere to take seriously.
Featured Painting: Peter Brueghel the Elder, Hunters in the Snow (1565)