Tuesday, November 18, 2014

Insurance Industry Hit Hard by Climate Change

There are a host of industries that will be impacted by climate change but none more than the insurance industry. According to some assessments it will cost a total of 8 trillion by 2100 if we do not substantially reduce emissions in the coming years. Warmer temperatures, rising sea levels and extreme weather events will be very costly to the global economy. Climate change will increase global conflicts, increase food shortages, decrease water supplies and increase morbidity and mortality.

Extreme weather and floods will be the primary cost driver for the insurance industry. A recent Ceres report states that in 2013 just under a third of the $116 billion in worldwide losses from weather-related disasters were covered by insurance.

Hurricane Sandy alone was responsible for 70 billion in economic loses of which about 26 billion were insured losses.

As the climate warms extreme weather will increase and this will in turn increase costs to insurance companies. The cost of increased payouts will be passed on to consumers and inflate the cost of premiums. It may even result in the elimination of certain forms of insurance in some geographical locations altogether.

According to Corelogic in the US alone there are 6.5 million homes at risk of storm damage with a total value of 1.5 trillion.

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