Climate change will affect insurance

CLIMATE change is set to make insurance more expensive and harder to obtain, the Association of British Insurers (ABI) has warned.

The group said predicted rises in temperatures in the UK looked set to “significantly” increase the cost to insurers of flood and windstorm damage.

It warned this would feed through into higher premiums for consumers, while it would also mean insurers had to hold more capital in reserve for potential losses, which could lead to a fall in the availability of cover.

The ABI worked with the Met Office and risk modelling group AIR Worldwide to look at the financial implications for insurers of predicted temperature increases of 2C, 4C and 6C.

It found the average cost of losses to insurers from river flooding and flash floods could rise by 14% to £633 a year if global temperatures rose by 4C, which could happen by as early as by 2060.

Cyclones
Annual losses as a result of windstorms could increase by 25% to £827million due to predicted changes to storm tracks, along which cyclones travel.

The cost to insurers from extreme floods, which occur once every 100 years on average in Britain, could soar by 30% to £5.4billion, while the cost of extreme windstorms could rise by 14% to £7.3billion, based on a 4C rise.

The group said Wales and south-west England would be the worst-affected regions of the United Kingdom.

Nick Starling, the ABI’s director of general insurance and health, said: “A two-degree temperature rise may be inevitable, but we can limit further increases.

“The clear message to world leaders meeting at the UN’s Copenhagen climate change summit in December is that they must reach agreement on ambitious emission reduction targets.”

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