Insurance industry could drive climate change initiatives
The insurance industry needs to develop in response to climate change, in order to assist the global society in controlling greenhouse gas emissions, and to take advantage of new opportunities, says a new report by a major UK insurance body.According to Climate Change and Insurance, published by the Chartered Insurance Institute (CII), the 60,000 member-strong leading professional body for the sector, economic losses from extreme weather have continued to escalate globally, and are likely to outstrip global GDP by 2065. Although in the developed world the victims of weather related incidents tend to bear 50% of their economic losses, the situation is far worse for developing nations, where victims are forced to carry the whole loss.
However, if the insurance industry, with its power over oil companies, rallies behind Kyoto initiatives, the current political impasse could be turned around, says the CII.
The report is a follow-up to research in 1994 by the Institute, and has been compiled through interviews with climate experts, and a survey of attitudes throughout the insurance sector. The report focuses on implications for four key customer groups in the UK: tourism, construction, utilities and property, and stresses concern that climate change will alter these industries significantly in terms of demand and supply. Industries such as insurance, which are further up the supply chain, need to start considering what this is going to mean for them, says the report.
According to the research, the insurance profession is now less concerned that climate change will prove to be disastrous for insurers, but is more aware that it will increasingly affect their market in a variety of ways (see related story and related story). However, there are still areas for improvement, say the report’s authors, pointing out that conventional insurance products still do not pick up on weather variability trade risks.
Within the UK, the main effect of climate change is the flooding of property, in particular through the burgeoning values of property in hazardous areas. The consolidation of industry means that individual companies will become richer, enabling them to partner, or even take the lead in initiatives to deal with climate change, as government funding gradually withdraws.