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22nd December 2007   Insurers Join Climatewise Climate change is a global issue, however it’s effects are felt not only on a global scale but at a very local level, impacting detrimentally on people’s lives in a very real way. The ABI are taking climate change extremely seriously and are one of the 16 founding members of Climatewise which has an aim to influence people’s behaviour and public policy to take action and reduce the impact of climate change. This includes how insurers behave and treat climatic changes and their impact on weather patterns and discrete events. The storms and floods that the UK saw in January, June and July of 2007 were an example many will say of global warming. However, in the main, the theory is that climate change will result in hotter summers in the UK and wetter and warmer winters. However, if this is the case, why was there flooding in June and July? Well, if global warming is to blame, then many will argue that as the polar ice caps melt, due to the increase in the Earth’s temperature, floods are a natural consequence of this warming of the Earth. Additionally, however in the UK the effects of this, could have been worsened by the fact that property has been built on flood plains, and thus when heavy rain is experienced, there is less land to allow the rain to run off. Hence, insurance companies will assess flood risk by the very geography of where houses and properties are, and essentially, the closer houses are to rivers and flood plains, the higher the risk, the higher the premium. Climatewise is made up of insurance companies and organisations in the insurance industry who have come together as a committed group to look for ways to reduce the risk of climate change and its detrimental impact. The impact of claims related to weather causes can be costed quickly and simply by adding up their amount over the last nearly twenty years. In the UK alone, claims have cost just over £800 million per annum each year since the early 1990’s. In a number of years, the claims have been greater than £1 billion. It is not only homes and property that are effected, but businesses and consequential losses and its knock on impact to the economy. Weather claims do not have to be about rain and storm, but heat can also have an impact, causing roots of trees to dry out and cause subsidence and heave. The floods in the UK in the summer of 2007, followed a previous summer that was extremely hot, although which did not beat many previous records for hottest summers in the UK since records began. The floods effected people’s lives and livings, with strains felt across the insurance industry on supply chain networks with drying machines being in short supply and having to be brought in from the United States and other countries around the World. Many people have had be accommodated in mobile homes and caravans, some of whom will still be in these for Christmas. The towns of Hull and the county of Gloucestershire were severely impacted amongst other regions of the country. The floods in June were more isolated, whereas in July the impact was felt in many pockets around the UK. This put an unusual strain on the resources of loss adjusters, builders, drying machines (as already mentioned), and insurance companies with international resources at hand, were able to utilise global purchasing power in order to manage and deal with these claims, however other insurers without this advantage, had to use other methods, many of which were the way in which customers were communicated with in their management of their claims to deal efficiently and with empathy. Global climate change, does not just effect property insurance, for example the heat waves in Greece will have had an impact on health insurance and life insurance companies when people’s health has been put at risk due to the heat. Reinsurance is also impacted by Global warming. Insurance companies themselves take out insurance and reinsure the risks on their books, either in whole or in part. When weather events occur around the World such as floods in Bangladesh, hurricanes in the Caribbean, the insurance industry is impacted, as reinsurance companies increase their premiums for reinsurance, and charge insurance companies more, this in turn is passed on to consumers. The question is, will insurance premiums continue to increase for everyone or will insurers discriminate more and become more sophisticated in their rating, and charge only those that are more at risk from weather related claims? This is something that will continue to be reviewed by the insurance industry, alongside the Government, especially if insurers are unwilling to offer cover at all for such risks as flood in particular.   back to top   Copyright Assetsure Limited 2007