Insurers must respond to climate change ” Lloyd’s

3 Dicembre 2006 · Nuovi rischi / Nuevos riesgos

Environmental Finance, 8 June 2006 – The insurance industry needs to improve its response to the impacts of climate change sooner rather than later if it wants to survive, according to a new report by Lloyd’s of London.

The industry has so far been slow to respond to climate change and must invest time and money in research to develop workable risk models, said the report from Lloyd’s, the world’s oldest insurance market.

“Although it’s almost two decades since the UN recognised that climate change was a catastrophic threat to earth, it’s clear that the insurance industry has not taken catastrophe trends seriously enough,” said Rolf Tolle, director of franchise performance at Lloyd’s.

“If we don’t take action now to understand the changing nature of our planet and its impact, our industry will face extinction,” he added.

In 2005, natural catastrophes killed 97,000 people and cost the insurance industry $83 billion ” more than ever before, Lloyd’s said.

Insurers must take a new approach to underwriting, the report said, which makes use of scientific advances to factor forecasts for the season ahead rather than simply basing decisions on historical patterns. Tolle said the models the industry has been using up until now do not adequately anticipate the pace of climate change.

The report also predicts that insurers’ profits could be reduced as a result of the climate’s impact on global asset values, which the industry has relied upon to boost its financial performance. It will therefore become more important for insurers to price risk according to exposure and to underwrite for profit.

Failure to take climate change into account could put companies at risk from future legal action from their own shareholders, investors and clients, it added. “We foresee an increasing possibility of attributing weather losses to man-made factors, with courts seeking liability and compensation claims for damages,” Lloyd’s said.

It also said that the insurance industry needs to work in partnership with governments and businesses to look at practical solutions to help society adapt to climate change. Such partnerships would help to address the issue of increasing concentrations of population and economic wealth in high risk areas, such as on coastlines, the report added.

“The insurance industry must now seize the opportunity to make a difference, not just to the future of our own industry, but to the future of society,” Lloyd’s concluded.

The report ” Climate Change: Adapt or Bust ” is part of Lloyd’s of London’s ‘360 Risk Project’, which aims to generate debate on key industry issues. It is available at www.lloyds.com.

Insurers must respond to climate change ” Lloyd’s

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