It’s not difficult to understand why insurers are concerned about climate change. Their model is based on risk assessment, risk mitigation and capital accumulation. Climate change poses a very real risk to insurance companies.
Uncertain and unsettled weather patterns and natural disasters can equal large-scale chaos, loss of life and widespread damage to land and property. This in turn can equal large insurance pay-outs.
With their expertise in risk analysis, insurers are therefore well placed to lead the fight against what’s arguably the largest man-made risk of our time.
Of course, insurers have a financial interest in climate change, with their business model and potential losses at the mercy of climate and the weather. Increasing emissions can lead to drastic changes in our atmosphere with weather patterns becoming increasingly extreme.
Just a 10% increase in hurricane speeds could see annual damage costs double.
Hurricane Katrina, for example, saw the US insurance industry left with over 1.7 million insurance claims across six states. It has been reported that the insurance industry paid out about $41.1 billion dollars.
Closer to home, flooding in Cumbria in 2009 resulted in around 25,000 flood and storm damage insurance claims. According to the Association of British Insurers, around £174 million was paid out.
Over the past few years, the insurance industry has become increasingly proactive on climate change. In 2007, a worldwide initiative driven by leading insurers was set up to help reduce climate change.
Leading insurance firms (such as Aviva, AXA, Allianz and Standard Life to name a few) came together to form ClimateWise.
With their experience and expertise in risk analysis, this collective aims to help governments and consumers alike to make informed and educated choices to help reduce climate change.
This involves incorporating climate change into their ongoing strategies, both from an underwriting perspective and in the investment of premiums received. The objective is to reduce economic risk associated with climate change.
The key aims of ClimateWise are to:
1. Lead in risk analysis
2. Inform public policy making
3. Support climate awareness amongst customers
4. Incorporate climate change into investment strategies
5. Reduce the environmental impact of their business
6. Report and be accountable
You can find lots of useful, everyday eco-friendly tips on The Energy Saving Trust website.