Business
My European Favourites – Tallinn, Estonia
Tallinn is one of those cities that you never hear people talk about visiting, but once you do, it becomes an instant favourite. Whenever we do an itinerary for a hockey, ringette or sightseeing group to Sweden and Finland, I always encourage the group to add a side trip to Estonia’s capital. It is only a two hour ferry ride from Helsinki to Tallinn, so it’s perfect for a day trip.
Tallinn has just under half a million inhabitants and is the largest city of Estonia. It is located directly south of Helsinki on the Gulf of Finland and on the eastern edge of the Baltic Sea. Once known by its German name, Raval, Tallinn has one of the best preserved old towns in Europe. Unlike many towns in Europe, Tallinn’s historic old town was never destroyed by war and is listed as a UNESCO World Heritage Site. I like to think of it as a smaller Prague. The city started building protective walls in the 13th century, and over time, it enlarged to a defence system of over two kilometers with gates and towers. Much of these structures survive today including twenty of the pointy red roofed towers. In some areas, it is possible to walk along the walls.
Near the old town you will find traditional neighborhoods with colorful wooden houses, green spaces and the redeveloped bustling port area. Estonians are blessed with public beaches to enjoy in the summer months and nearby forests to explore on nature walks. Within view of the old town, there is a modern city, complete with skyscrapers and all the modern amenities you would expect. How modern is Tallinn? It has free public WIFI, and as a high-tech city, it has become a leader in the sector of cyber security. You may have used the services of a well-known Estonian startup company named Skype.
About Estonia
There is evidence that the area was settled as far back as 5,000 years ago, but the city became an important trading hub in the 14th to 16th centuries when it was a member of the Hanseatic League, which controlled trade in the Baltic and North Seas. Even at that time, the city only had about 8,000 inhabitants.
Over the years, Estonia has been ruled by the Holy Roman Empire, Denmark, Sweden and Russia. The country gained short lived independence from Russia after WWI only to be reclaimed as part of the Soviet Union after WWII. Like most of the countries that became part of the USSR, they suffered through a fifty year period of communist policies and stagnation. In 1991, after the dissolution of the Soviet Union, Estonia regained its independence. Since then it has flourished into a western style city while maintaining its rich cultural and architectural history. It is a member of the European Union and NATO.

Tallinn’s distinctive mix of a modern and historic skyline as we arrive on the ferry from Helsinki.
Ferry to Tallinn
Tallinn is a two-hour ferry ride south from Helsinki, and it’s possible to go early in the morning across the Gulf of Finland and return late on the evening ferry. The Tallink ferry has sitting areas on different decks plus shopping and dining options onboard. If possible, I would recommend an overnight stay near the old town and return to Helsinki the following evening.
From Sweden, you can arrive on the overnight ferry that leaves Stockholm in the early evening and arrives in Tallinn in the morning. Your individual ticket includes a cabin that can sleep up to four people with two single beds and two pull down upper berths. Onboard, you can enjoy shopping, entertainment, bars and restaurants. Another option from Stockholm is to take the ferry to Riga and spend a couple of days in Latvia’s capital. The drive from Riga to Tallin is about four hours, and I usually like to stop along the way in the seaside resort city of Parnu to have lunch and walk in the city centre.
A Tale of Two Towns
Tallinn’s historic center is separated into two areas, Toompea, and Vanalinn. At one time, they were two feuding medieval towns. The upper town, Toompea, includes the aptly named Toompea Castle. The lower town, Vanalinn, has narrow alleyways, the town square, shops and restaurants. Vanalinn, was the Hanseatic League trading center filled with merchants from Germany, Denmark and Sweden. The two areas are connected by two passages called the short leg (Lühike Jalg) and the long leg (Pikk jalg).
Toompea, Tallinn’s Upper Town
As expected, the Toompea Castle sits high above the lower town on an ancient stronghold site that dates back to a wooden fortress in the 9th century. The castle, a symbol of political power through the ages, has been expanded and remodeled over the years by Estonia’s rulers to meet their needs.
Once a castle of ancient Estonians starting in the 11th century, it was later used by the Danish during most of the 13th century. It wasn’t until the 14th and 15th centuries, while in the hands of the Holy Roman Empire’s Teutonic Order, that it was built to resemble what we see today. The religious order changed the castle interior to include a chapel, chapel house, convent and dormitories for the knights. They added defence towers named Pikk Hermann (Tall Hermann), Landskrone (Crown of the land), Pilsticker (Arrow Sharpener) and Stür den Kerl (Ward Off Enemy) to protect each of its four corners. During the 16th century when Estonia became a part of Sweden, they changed the castle from a crusader’s fortress to a symbol of political power, with an administrative and ceremonial purpose.

Tall Hermann, entrance to the Governors Garden and the Toompea Castle’s pink palace.
When the Russians took over in the 18th century, the Czar had the castle turned into a palace by adding a Baroque and Neoclassical wing to the eastern part of the castle and a public park on the south east. When Estonia declared its first independence from Russia after WWI, the former convent of the Teutonic Order was transferred into an assembly hall for the Parliament of Estonia, named the Riigikogu. After being disbanded during the Soviet era from 1940 to 1991, the assembly, the Riigikogu, was reinstated in 1992 as the Estonian Parliament with 101 members.
I like to start my tour of Tallinn in the upper town just outside of the Toompea Castle, so I can get a good look at the impressive Tall Herman and original castle wall from the Governors Garden. During the castle’s evolution, the Stür den Kerl castle tower has been demolished while the others have been integrated into building projects. The 48 meter high Tall Hermann still stands and has become an important symbol of Tallinn and the nation. The Estonian flag is raised atop the tower every day at sunrise as the national anthem plays and it is lowered at sunset.
Around the corner from the park is the Lossi Plats (Castle Square) where we can see the pink palace which was added to the front of Toompea Castle during the renovations by Russian Czars. Topped by the Estonian flag, the one-time medieval fortress is now clearly the modern centre of government for Estonia. On the opposite side of the square is a richly decorated Russian orthodox cathedral.

The Castle Square, the Alexander Nevsky Cathedral and an Russian Orthodox mosaic.
Alexander Nevsky Cathedral
The striking Alexander Nevsky Cathedral was built in 1900 in Russian Revival style when Estonia was part of the Russian Empire. It is Tallinn’s largest orthodox cupola cathedral and is dedicated to Saint Alexander Nevsky, a Russian military hero, who in 1242, won a famous “Battle of the Ice” against the Teutonic Knights on Lake Peipus. The lake on Estonia’s eastern border is shared with Russia with the modern day border between the countries being about half way across.
During the USSR period, the church came into decline due to communist non-religious policies. Since 1991, the church has been meticulously restored even though it is a constant reminder of Russia’s influence, power and oppression over Estonia through the ages. There were actually plans to demolish the structure in 1924, but it was spared due to a lack of funds to raze such a large building. Today, the church is one of Tallinn’s most visited attractions and is unique due to its contrasting architectural style.
The church exterior has five onion domes, each topped with a gilded Orthodox cross. The church has eleven bells that were cast in St. Petersburg, including one massive 16 ton bell.
Like other traditional Orthodox churches, there are no pews as worshippers were required to stand during services. The ornate interior has three alters, stained glass windows and three gilded wooden iconostases (wall of icons and religious paintings) which separate the nave from the alters. Entrance to the cathedral is free. The intricate detail and colors of the mosaics and icons are amazing and well worth seeing.

St. Mary’s Church, the top of the baroque tower spire with the year 1772.
Leaving the Castle Square, we venture further into the upper town, and about 100 meters in, we reach the Kiriku Plats (Church Square) and a white medieval church with a baroque bell tower. The Toomkrik built by the Danes in the 13th century, also known as the Dome Chrurch or St. Mary’s Cathedral, is Estonia’s oldest church. Originally a Roman Catholic cathedral, it became Lutheran in the mid 16th century and is the seat of Tallinn’s Archbishop of the Estonian Evangelical Lutheran Church. Although the church endured severe damage in the great fire of 1684, it was the only building on Toompea left standing. It was restored to its previous state shortly after the fire and a new baroque spire was added in the 18th century.
From the Church Square, we can see the light green colored Estonian Knighthood House. This is the 4th Knighthood house that was built for noble Knights to meet and enjoy festivities. The Knighthood was formed in 1584 by the Baltic German nobles, but it was disbanded in 1920. Currently, the building is used by the Estonian Academy of Arts. On the right of the building we take the Kohtu street until we reach the end and turn right onto a small open area between two buildings.

Kohtuotsa views: Towards the harbour and of the old town with skyscrapers in the distance.
A Panoramic View and Sweet Almonds
As we enter the Kohtuotsa viewing platform, which is a courtyard between two buildings, the smell of candied almonds overwhelms the senses. A wooden kiosk with a couple of girls dressed in traditional costume are making batches of sweet almonds in a copper pot. They have a sample for you to try, and when you do, the sale is complete. They have two options, Magus Mandel (Candied) or Soolane Mandel (Salty). I have the candied ones every time.
There is a stone wall at the end of the platform with amazing panoramic views of Tallinn. Looking to the left, you can see the white tower of St. Olaf’s Church amongst medieval towers with the harbour and the sea in the distance. Directly ahead are the roof tops and spires of the lower town with the skycrapers of the city in the distance. It’s quite a contrast of architecture from medieval structures to modern steel and glass.
Another nearby viewing platform is the Patkuli, which is reached by climbing 157 steps from the old town up to Toompea. This platform offers a great view of the harbour area.
Leaving the Kohtuotsa, we go back towards the Nevsky Cathedral and take the Long Leg Street down into the lower town. We walk along the fortification walls until we reach the Long Leg Tower and enter the lower town.

Walking down the Long Leg passage to the Long Leg Tower and into the lower town.
Vanalinn – Tallinn’s Lower Town
Emerging from the Long Leg Tower, we continue on Pikk street until we reach the Grand Guild Square (Suurgildi Plats). The square is named after the medieval gold colored Great Guild Hall that is now the Estonian History Museum. The Great Guild was a medieval association of merchants, artisans, and craftsmen in Tallinn from the 14th century until 1920. On the square, we also find the Lutheran Holy Spirit Church (Pühavaimu kirik). The white washed medieval church has stained glass gothic windows, an octagonal bell tower and an interesting 17th century carved clock on the façade. If you enter the church, you will see elaborate wood working, especially on the alter.

The Maiasmokk Café, the Holy Spirit Church, the church clock and the pharmacy sign.
Established in 1864, the Maiasmokk Café on the square, is the oldest in Tallinn. The café interior hasn’t changed for over a century. It is famous for its marzipan, which is said to have been originated in Tallinn. Marzipan is made from almond meal and either sugar or honey. The café’s Marzipan Room details the city’s history of making marzipan including traditional marzipan figures made from special molds.
If we take a small passage along the church, we will reach the Town Hall Square (Raekoja Plats). As we enter the square, two doors down on our left is the Town Hall Pharmacy (Revali Raeapteek). This pharmacy dates back to 1422, and it may be the world’s oldest pharmacy in continuous use.The pharmacy has a museum where you can see some of the old time medicines and potions. You can test various herbal tea blends picked from local fields in the basement of the Town Hall Pharmacy (or Raeapteek) or explore the exposition of the 17th to the 20th-century medicine in the back room. You can purchase some of the products from the middle ages including teas, spices, chocolate, marzipan and claret, a potent libation made from wine and spices that dates back to 1467.

The Old Town Square’s colorful buildings, the Town Hall and a Town Hall dragon water spout.
The lively Town Hall Square, one of the best preserved medieval town squares in the world, was a market place in the Middle ages. Many of the colorful buildings on the square were once medieval merchants’ homes, offices and warehouses from the Hanseatic Golden Age. During the summer months, the restaurants around the square set up their umbrellaed patios where you can enjoy lunch and a cool beverage as you watch locals and tourists mill about. Restaurants like “III Draakon” and ‘Olde Hansa” offer a unique medieval experience with menu items made with elk, bear and boar meat.
The square is the centre of the Old Town Days medieval festival, concerts, fairs and the centuries old Christmas market. It is said that in 1441, the Brotherhood of the Blackbeards, a professional association of merchants, ship owners and foreigners, erected the very first Christmas tree here on the square. Today, in addition to the tree, the Christmas market fills the square with kiosks selling everything from gingerbread to knitted mittens and handicrafts. Other kiosks sell snacks, oysters and mulled wine to keep you warm. Kids can drop off letters at the Santa Claus cabin and ride the carousels in a magical setting. On a stage, hundreds of performers take turns entertaining the crowds during the markets month long stay from the 27th of November to the 27th of December.

Sweet Almond vendor and Old Town buildings. The Christmas market stage and a kiosk.
The town hall, built in 1404, sits prominently on the square and is the oldest in the Baltic and Scandinavian regions. It is no longer in the seat of the municipal government but is used for special events and ceremonies, and is the home of the Tallinn City Musuem. The town hall tower can be climbed in the summer months to get another great view of Tallinn. Since 1530, a weather vane of Vana Toomas, or Old Thomas, has been keeping lookout atop the spire. Old Thomas, who is holding a sword and an arrow, is said to be a protector of Tallinn.
The square is spectacular, but it can be touristy. I like to wander through the cobblestone streets and alleyways surrounding the centre to find restaurants and cafes where the locals frequent. Walking these side streets is like taking a time machine back to the medieval ages, but you will find interesting little museums, galleries and shops selling local products like amber.

St. Catherine’s Passage kiosks and alley. The Viru Gate tower and the white Viru Hotel.
St. Catherine’s Passage, the Viru Gate and the KGB
From the Old Town square if we go to the right of the old town and down the busy pedestrian Viru Street we will reach the St. Catherine’s passage on Müürivahe Street. The passage leads to the St. Catherine’s Monastery which was founded in 1246 by the Monks of the Dominican Order. The monastery is the oldest building in Tallinn. At the monastery, you can visit the chapel, gallery, or book a private tour. The medieval passage itself, formerly known as Monk’s alley, has the tall fortification wall on one side with little kiosks below selling handicrafts and 15th to 17th century residences on the other side, with some now being used as artists workshops.
Only steps away from the St. Catherine’s passage is the 14th century Viru Gate that was part of Tallinn’s wall defences. When the entrances to the Old Town were widened in the late 1800’s, many of the gates were destroyed. The Viru Gate’s corner towers survived and are a great divide from the medieval town on one side and the modern city on the other.
During the 50 year Soviet occupation of Estonia, the KGB had its headquarters in the old town at Pagari 1. In its basement, suspected enemies of the state were imprisoned, interrogated and tortured. If convicted of crimes, they were either shot or sent to labour camps in Siberia. The tall white Viru Hotel that can be seen clearly in the distance from the Viru Gate has a KGB Museum. Like any hotel where foreigners stayed, the hotel had to have spying facilities for the KGB. The museum tells the story of their activities and the Soviet mindset.

St. Olaf’s Church, the Fat Margaret Tower, and the Kadriorg Palace.
St. Olaf’s Church
On the northern edge of the old town is Tallinn’s biggest medieval building, the iconic St Olaf’s Church. Named after the sainted Norwegian king Olav II Haraldsson, the church was the tallest building in the world from between 1549 and 1625 due to its 124 meter tower. The church had three great fires in 1625, 1820 and in 1931 caused by lightning striking its tall spire. In fact, lightning has struck the church at least 10 times. During the Soviet occupation, the spire was used as a radio tower and KGB surveillance point. Today, if you climb 232 steps on a winding staircase you will have a great view of the city and the harbour area. I’m not sure I would go on an overcast day tough.
Near the church is the Fat Margaret tower which houses a part of the Maritime Museum. The main part of the museum is the Seaplane Harbour (Lennusadam) which is located a couple of kilometers away. It is one of Europe’s biggest maritime museums with a submarine, icebreaker, seaplane, an aquarium, simulators and other activities.
Other Things to do in Tallinn
If you go to the wall connecting the Nunna, Sauna and Kuldjala towers, you can walk the city walls, like the medieval guards that protected the town.
Near the old town, the Rotermann quarter has been transformed from old warehouses and factory buildings into a trendy and lively neighborhood with modern architecture.
Kumu Art Museum, with a modern architectural design, depicts various periods of Estonian art from the Academic Style to Modernism, from Soviet Pop Art to contemporary art.
Near the Alexander Nevsky Cathedral, Tallinn’s Museum of Occupations tells the history of the country’s occupation by the Nazis during WWII and then the Soviets.
Patarei Prison is a huge complex in the Kalamaja district that can be visited in the summer months. Once an artillery battery in the 19th century, it became a prison from 1919 to 2002.
The 314 meter high Tallinn TV Tower has a glass-floored viewing platform on the 21st floor with a 360 degree view of the city. Thrill seekers can take a safety harnessed walk on the open deck.
Foodies may want to visit the Kalev Chocolate factory or the Baltic Station Market.
Just Outside of Tallinn
Just outside Tallinn is Kadriorg Park. Established by Peter the Great in 1718, it has the Kadriorg Palace as well as beautiful gardens and woods. The park includes a concert area, children’s park, a people’s park and a Japanese garden.
The 72 hectare Estonian Open-Air Museum has around 80 reconstructed buildings from the 18th to 20th centuries. The traditional structures were brought here from throughout Estonia.
Tallinn is not overly priced, or especially crowded with tourists. You can easily spend a few days in Tallinn, and it is well worth adding to any itinerary of Sweden or Finland. You will thank me for it.
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Business
The Climate-Risk Industrial Complex and the Manufactured Insurance Crisis
We’ve all seen the headlines — such as the below — loudly proclaiming that due to climate change the insurance industry is in crisis, and even that total economic collapse may soon follow. For instance, since 2019, the New York Times, one of the primary champions of this narrative, has published more than 1,250 articles on climate change and insurance.
Climate advocates have embraced the idea of a climate-fueled insurance crisis as it neatly ties together the hyping of extreme weather and alleged financial consequences for ordinary people. The oft-cited remedy to the claimed crisis is, of course, to be found in energy policy: “The only long-term solution to preserve an insurable future is to transition from fossil fuels and other greenhouse-gas-emitting industries.”
However, it is not just climate advocates promoting the notion that climate change is fundamentally threatening the insurance industry. A climate-risk industrial complex has emerged in this space and a lot of money is being made by a lot of people. The virtuous veneer of climate advocacy serves to discourage scrutiny and accountability.
In this series, I take a deep dive into the “crisis,” its origins, its politics, and its tenuous relationship with actual climate science.¹ Today, I kick things off by sharing three fundamental, and perhaps surprising, facts that go a long way to explaining why insurance prices have increased and who benefits:
- Property/casualty insurance is raking in record profits;
- Insurance underwriting returns vary year-to-year but show no trend;
- “Climate” risk assessments are unreliable and a cause of higher insurance prices.
Grab a cup of coffee, settle in, and let’s go . . .
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Property/casualty insurance is raking in record profits
This year is shaping up to be an extremely profitable year for the property/casualty (P/C) insurance industry. In a report covering the first six months of 2025, the National Association of Insurance Commissioners (NAIC) shares the good news (emphasis added):
Despite heavy catastrophe losses, including the costliest wildfires on record, the U.S. Property & Casualty (P&C) industry recorded its best mid-year underwriting gain in nearly 20 years.
In the second half of 2025, returns got even better for the P/C industry. According to a new report from S&P Global Intelligence, as reported by Carrier Management (emphases added):
For U.S. P/C insurers, it just doesn’t get any better than this. . . With a combined ratio of 89.1 for third-quarter 2025, the U.S. property/casualty insurance industry had its best quarter in at least a quarter of a century—and maybe longer, S&P Market Intelligence said.
Taking a longer view, the extremely profitable 2025 follows significant industry profitability in 2023 and 2024, according to the National Association of Insurance Commissioners (NAIC), as shown in the figure below.
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What accounts for the high profits?
The NAIC explains:
Strong premium growth, driven largely by rate increases, coupled with abating economic inflation . . . Net income nearly doubled compared to last year, attributed to the underwriting profit and healthy investment returns.
Below, I’ll pick up the issue of rate increases and explore one big reason why they have occurred.
If there is a P/C insurance crisis, it may be in figuring out how to explain its impressive returns at the same time that the climate lobby is telling everyone that the industry is collapsing.
Insurance underwriting returns vary year-to-year but show no trend
The P/C industry makes money primarily in two ways — underwriting of insurance policies and investment income. Typically, insurance companies seek to break even, or lose little, on insurance underwriting and earn profits on investment income.
Warren Buffet, in his 2009 letter to Berkshire Hathaway shareholders, explained concisely how the P/C industry works:
Our property-casualty (P/C) insurance business has been the engine behind Berkshire’s growth and will continue to be. It has worked wonders for us. We carry our P/C companies on our books at $15.5 billion more than their net tangible assets, an amount lodged in our “Goodwill” account. These companies, however, are worth far more than their carrying value– and the following look at the economic model of the P/C industry will tell you why.
Insurers receive premiums upfront and pay claims later. In extreme cases, such as those arising from certain workers’ compensation accidents, payments can stretch over decades. This collect-now, pay-later model leaves us holding large sums– money we call “float”– that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit. Though individual policies and claims come and go, the amount of float we hold remains remarkably stable in relation to premium volume. Consequently, as our business grows, so does our float.
If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money– and, better yet, get paid for holding it. Alas, the hope of this happy result attracts intense competition, so vigorous in most years as to cause the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float. Usually this cost is fairly low, but in some catastrophe-ridden years the cost from underwriting losses more than eats up the income derived from use of float.
The figure below, using data from the Insurance Information Institute, shows the underwriting performance of the P/C industry from 2004 to 2024.
The time series shows lots of ups and downs, but no trend — by design, as Buffet explained. There are certainly no signs of an underwriting crisis, much less indications of a coming collapse. The P/C industry looks both well-managed and healthy.
“Climate” risk assessments are unreliable and a cause of higher insurance prices
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If profits are high and underwriting is steady, then what then accounts for increasing insurance prices — which, as of the end of 2024, increased 29 consecutive quarters in a row (above)?
A big part of the answer is Climate Change. But not how you might think.
A decade ago, Mark Carney — then Governor of the Bank of England and today Prime Minister of Canada — gave an influential speech titled, Breaking the Tragedy of the Horizon – climate change and financial stability.
Carney argued that the insurance industry was at risk due to changes in the climatology of extreme events that were not properly understood by experts in the industry:
[T]here are some estimates that currently modelled losses could be undervalued by as much as 50% if recent weather trends were to prove representative of the new normal. . . Such developments have the potential to shift the balance between premiums and claims significantly, and render currently lucrative business non-viable.
Coincident with Carney’s 2015 speech, the Bank of England released a report on the impacts of climate change on the insurance industry, and noted that conventional catastrophe modeling did not effectively consider a changing climate. The Bank of England kicked off a longstanding campaign to convince people that extreme weather events were changing dramatically in the near term.
Subsequently, in 2019, the Bank of England required firms to assess their “climate risks.” This guidance was updated last week. In (a coordinated) parallel effort, national and international organizations focused on “climate risk” to the financial sector started multiplying — such as the Climate Financial Risk Forum and the Network for Greening the Financial System.
The climate-risk industry was born circa 2019.
There is an incredible story to be told here (and Jessica Weinkle is the go-to expert), but for today, the key takeaways are that (a) the notion of “climate risk” to finance, including insurance, led to the creation of a “climate risk” industry, and (b) within this industry, a new family of risk assessment vendors emerged, promising to satisfy the new demands for climate risk disclosure and risk modeling.
The Global Association of Risk Professionals (GARP) explains:
As this [“climate risk”] was a new discipline for most financial firms, many turned to third party providers (“vendors”) to help them with different areas of expertise. There are now many physical risk data vendors, which offer a variety of services to financial institutions. While vendor offerings often sound alike — providing projections of how physical risk could evolve for locations across a range of risks and climate scenarios — they can differ significantly in terms of features, approach, or suitability for specific needs, and the underlying models that these providers use differ in methodology and assumptions.
GARP just published an incredibly important study that assessed how 13 different “climate risk” vendors modeled physical risk and risk of loss across 100 individual structures around the world.²
The results are shocking — given how they are used in industry, but should not be surprising — given what we know about modeling.
There is absolutely no consensus across vendors about “climate risk” in terms of either physical risks or risks of loss.
The figure below shows, for 100 different properties around the world, the differences in modeled 200-year flood risk across the 13 vendors, as refelcted in modeled flood heights. The maximum difference among the properties across vendors is about 12 meters and the median difference is about 2.7 meters — These are huge differences.
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In terms of risk of loss, the models have an even greater spread. The figure below shows that for a modeled 200-year flood, 10 properties are modeled by at least one vendor to have total losses (100%) while another vendor models the same properties to have no losses, under the exact same event. The median difference between minimum and maximum modeled loss ratio is 30% — Another huge number.³
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Insurance pricing does not scale linearly with increasing modeled loss ratios. Consider that the difference between a modeled 10% loss ratio and a 40% loss ratio (i.e., the 30% median difference across vendors from above) might result in a 10x increase in insurance rates. Risk adverse insurers have incentives to price at the most extreme modeled loss.
Model inaccuracies, unceratinties, spread, and ambiguity are feature not flaws when it comes to making money. “Climate risk” modeling has resulted in a financial windfall not just for the newly created climate analytics industry, but also for insurers and reinsurers who have seen the envelope of modeled losses expand. The need for new models, of questionabl fidelity, are necessary to satisfy industry guidance and government regulators.
The net result has been a seemingly scientific justification for increasing insurance rates.⁴
There are of course real changes in physical risk, exposure, and vulnerability as well as the regulatory and political contexts within which the P/C industry must operate. The discipline of catastrophe modeling has long integrated these factors to assess risks. As insurance policies and reinsurance contracts are typically implemented on a one-year basis, and this well-positioned to incorporate changng perceptions of risk, this series will explore why a new “climate risk” assessment industry was even needed in the first place.
What about that “climate risk”? THB readers will be very familiar with the science of extreme events and climate change, which, as reported here, happens to be consistent with both the Intergovernmental Panel on Climate Change and those in the legacy catastrophe modeling community.
One of those modeling firms, Verisk, gets the last word for today:
We estimate about 1% of year-on-year increases in AAL [Average Annual Loss] are attributable to climate change. Such small shifts can easily get lost behind other sources of systematic loss increase discussed in this report, such as inflation and exposure growth. The random volatility from internal climate variability also dwarfs the small positive climate change signal.
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Business
Canada invests $34 million in Chinese drones now considered to be ‘high security risks’
From LifeSiteNews
Of the Royal Canadian Mounted Police’s fleet of 1,200 drones, 79% pose national security risks due to them being made in China
Canada’s top police force spent millions on now near-useless and compromised security drones, all because they were made in China, a nation firmly controlled by the Communist Chinese Party (CCP) government.
An internal report by the Royal Canadian Mounted Police (RCMP) to Canada’s Senate national security committee revealed that $34 million in taxpayer money was spent on a fleet of 973 Chinese-made drones.
Replacement drones are more than twice the cost of the Chinese-made ones between $31,000 and $35,000 per unit. In total, the RCMP has about 1,228 drones, meaning that 79 percent of its drone fleet poses national security risks due to them being made in China.
The RCMP said that Chinese suppliers are “currently identified as high security risks primarily due to their country of origin, data handling practices, supply chain integrity and potential vulnerability.”
In 2023, the RCMP put out a directive that restricted the use of the made-in-China drones, putting them on duty for “non-sensitive operations” only, however, with added extra steps for “offline data storage and processing.”
The report noted that the “Drones identified as having a high security risk are prohibited from use in emergency response team activities involving sensitive tactics or protected locations, VIP protective policing operations, or border integrity operations or investigations conducted in collaboration with U.S. federal agencies.”
The RCMP earlier this year said it was increasing its use of drones for border security.
Senator Claude Carignan had questioned the RCMP about what kind of precautions it uses in contract procurement.
“Can you reassure us about how national security considerations are taken into account in procurement, especially since tens of billions of dollars have been announced for procurement?” he asked.
“I want to make sure national security considerations are taken into account.”
The use of the drones by Canada’s top police force is puzzling, considering it has previously raised awareness of Communist Chinese interference in Canada.
Indeed, as reported by LifeSiteNews, earlier in the year, an RCMP internal briefing note warned that agents of the CCP are targeting Canadian universities to intimidate them and, in some instances, challenge them on their “political positions.”
The final report from the Foreign Interference Commission concluded that operatives from China may have helped elect a handful of MPs in both the 2019 and 2021 Canadian federal elections. It also concluded that China was the primary foreign interference threat to Canada.
Chinese influence in Canadian politics is unsurprising for many, especially given former Prime Minister Justin Trudeau’s past admiration for China’s “basic dictatorship.”
As reported by LifeSiteNews, a Canadian senator appointed by Trudeau told Chinese officials directly that their nation is a “partner, not a rival.”
China has been accused of direct election meddling in Canada, as reported by LifeSiteNews.
As reported by LifeSiteNews, an exposé by investigative journalist Sam Cooper claims there is compelling evidence that Carney and Trudeau are strongly influenced by an “elite network” of foreign actors, including those with ties to China and the World Economic Forum. Despite Carney’s later claims that China poses a threat to Canada, he said in 2016 the Communist Chinese regime’s “perspective” on things is “one of its many strengths.”
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