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A new report reveals unpredictable weather is affecting the insurance industry’s ability to gauge risks.
A new report published by a coalition of the world’s biggest insurers has concluded that the industry’s ability to manage risks is being threatened by climate change, as unpredictable weather events disrupt the patterns which would be used to predict an asset’s risk.
The analysis by ClimateWise, a coalition of insures including Allianz, Lloyd’s and Zurich, found that the difference between the costs of natural disasters and the amount insured – known as the “protection gap” – has quadrupled to £79bn a year since the 1980s. Driving up uninsured losses, this inability to accurately predict weather risk is even leaving some previously insurable assets uninsurable, reports The Guardian.
According to SwissRe, insurer and ClimateWise member, the economic losses of natural catastrophes have increased fivefold since the 1980s, reaching around £134bn today. Towns and cities in coastal locations are particularly vulnerable.
So what needs to happen? Traditional insurance industry responses to rising risks, such as raising premiums or withdrawing cover will not help, the report says, with Maurice Tulloch, chairman of global general insurance at Aviva and chair of ClimateWise, warning that: “Our sector will struggle to reduce this protection gap if our response is limited to avoiding, rather than managing, society’s exposure to climate risk.”
Instead, the ClimateWise report says the industry must convince policymakers of the urgent need for action on climate change. Insurance companies are also being urged to work with their clients to make assets more resilient to extreme weather conditions, as well as encouraging the development of insurance markets in poorer nations that are growing rapidly.
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