New York, Mumbai Basements Seen as Uninsurable by Next Decade

Private property below ground in New York and Mumbai may not be insurable in the next decade if climate change advances, the head of one of Europe’s largest insurers said.

“If you go much further to 2020, 2030, we can clearly say that at a scenario between 3 and 4 degrees, it’s not insurable anymore,” Thomas Buberl, chief executive officer of AXA SA, said on a panel at the World Economic Forum’s annual meeting in Davos, Switzerland. “Your basement shop in New York, your basement shop in Mumbai will at this point not be insurable anymore.”

Global warming and the subsequent rise of extreme weather events are expected to increase insurance companies’ claims, possibly to the point where certain assets are too risky to underwrite new policies in some places. The number of natural disasters from hurricanes in the Atlantic Ocean to wildfires in California increased last year. As sea levels rise, cities on coastlines will be much more vulnerable to flooding.

A growing number of institutional investors have been divesting from fossil fuel assets and companies, saying that their capital will be more productive and safer in investments that contribute to a transition to a cleaner global economy. The $1 trillion Norwegian sovereign wealth fund said in November that it would sell all of its oil and gas stocks.

AXA, which is based in Paris, said in 2015 that it would sell its holdings in companies that get the majority of their business from coal. It has also stopped insuring coal plants, according to Buberl. The negative effects of climate change on AXA’s claims outweigh the returns from investing in coal, he said.

In other sectors, AXA is also directing its capital to try to enable change at a company level, rather than simply selling its positions.

“We have to also accompany the existing players. Because there’s many of them that want to change,” Buberl said. “Therefore helping them to change and directing investment to the areas where the change is happening is extremely important not to have to have an abrupt stop of it.”