Insurers warn of the chill blast of climate change in new report

The cost of insurance will soar across Britain unless urgent measures are taken to halt the rise in global temperatures, industry experts will warn this week.

By Jamie Dunkley, City Reporter (Insurance and Pensions)Published: 10:21PM GMT 31 Oct 2009
The Association of British Insurers, whose members control about 15pc of the FTSE 100, will reveal the findings of its latest report into the subject. This will show that a four degree rise in global temperatures could result in the cost of extreme inland floods – those expected to hit the UK once every 100 years – rising by 30pc to £5.4bn.
The study into the financial impact of rising temperatures across the world claims this could happen by 2060. The association will add that the UK is likely to get windier too, with the cost of a once-in-a- century windstorms rising 14pc to £7.3bn. One in six properties across the UK are at risk from flooding from river, sea and surface water. This equates to about 5.2m properties across the country. In 2007, the insurance industry was left with a £3bn bill after summer floods devastated large parts of the country.

The ABI will give warning at the United Nations Climate Change Summit in Copenhagen in December, that without global agreement on reducing emissions, weather related costs will continue to rise. This would lead to more expensive and harder to obtain insurance protection.
Andrew Torrance, chairman of ClimateWise, an industry lobby group, and chief executive of Allianz Insurance in the UK, added that insurers could also be left with tougher capital requirements.
"The climate models strongly suggest that we are going to see more frequent and more extreme weather events," he said. "This will increase the level of weather related claims paid by insurers generally and bring greater volatility to claims levels. This means that insurers will need to hold more capital."
ClimateWise is also looking to increase pressure on governments attending the climate change conference. The group wants the developed world to agree a 40pc cut in emissions by 2020 and to reach a deal on the size and structure of a financing package to help the developing world tackle climate change.
"The expected increase in flood claims underlines the need to improve flood defences and limit development on flood plains," Mr Torrance added. "This will enable the insurance industry to continue to make insurance available as widely as possible."