Costs of climate change damage set to rocket

Insurance groups have warned that costs associated with extreme weather events caused by global warming are likely to rise by two-thirds by the 2080s.

The report, released by the Association of British Insurers (ABI), warns that costs in Europe from weather-related damages could rise by as much as US$150 billion every year, while the UK could see costs of US$40 billion a year from flooding alone.

John Firth, Director of Climate Risk Management said: “This clearly demonstrates that there is sufficient certainty in the science to begin quantifying the risks.”

The report was prepared with leading insurance and reinsurance companies – Munich Re, Swiss Re, Lloyds Corporation, Aviva, ACE, Zurich, USS – and used modelling techniques from AIR Worldwide Corporation to calculate the costs of extreme weather.

It highlights the importance of taking action now to reduce the inevitable impacts of climate change, through new building codes and improved design standards.

“Businesses need to integrate climate risks into their strategic decision making processes to begin taking into account the costs of adaptation,” Mr Firth added.

The report was welcomed by Environment Secretary Margaret Beckett. Speaking at the launch of the report she said it brought the financial risks of climate change into sharper focus.

“Set against the picture of spiralling costs, though, is the evidence that cutting emissions can avoid the greatest predicted damage costs and most of the premium increases. And it is by averting dangerous climate change altogether that we can best protect people and livelihoods from climate risks.”

The ABI report is the latest financial report on climate change ahead of the G8 summit starting this week in Gleneagles. Last week WWF and finance group Allianz teamed up to warn of the financial implications of global warming for the future (see related story).

By David Hopkins

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