Study says insurance industry dangerously unprepared for extreme weather
Source: Asia Insurance Review | Jun 2018
As historic flooding caused by climate change devastated communities in Canadian states of New Brunswick and British Columbia, new research from the University of Waterloo revealed that the insurance industry has not considered a changing climate in their practices, putting homeowners at financial risk.
The study which looked at data from 178 insurers, found that most insurance companies assumed the risk to property from extreme weather is static and based their premiums on historical data. However, as extreme weather events are increasing in severity, frequency, and unpredictability, insurers have not adjusted.
“As extreme events become more frequent, insurers that ignore climate change will not put away enough money to cover their claims. To recoup those losses, they’ll have to raise rates or pull coverage from high risk areas,” said Mr Jason Thistlethwaite, a climate-change economist at the University of Waterloo. “When this shift happens, thousands of people will lose coverage or it will be unaffordable.”
Another finding in the report outlined how reinsurers have been better at reacting and adapting to climate change-related financial risk. This dynamic could lead to significant disruption in global insurance industry.
“Some insurers are better at understanding climate change than others. These organisations will survive, and likely be able to sell climate services to their counterparts struggling to understand the problem,” said Mr Thistlethwaite. “Those that don’t, will fail. Insurers are supposed to watch our backs by looking into the future and protect us from unexpected events. We pay to not worry about these things. A