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13 - An overview of the impact of climate change on the insurance industry

Published online by Cambridge University Press:  14 September 2009

By
Andrew Dlugolecki
Edited by
Henry F. Diaz  and
Richard J. Murnane
Andrew Dlugolecki
Affiliation:
17, Craigie Place, Perth, PH2 0BB Scotland, UK
Henry F. Diaz
Affiliation:
National Oceanic and Atmospheric Administration, District of Columbia
Richard J. Murnane
Affiliation:
Bermuda Biological Station for Research, Garrett Park, Maryland
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Summary

Condensed summary

This chapter focuses on the types of extreme weather and climate events that are important to property insurers, and it considers evidence on how those risks have been changing and how they might change in the future with climate change. Some evidence is drawn from the United Kingdom, which has wide insurance coverage for weather perils and much familiarity with international catastrophe insurance. The author believes there is good ground to argue that climate change is already affecting the risks, although it is not the only factor that has caused change. Further, the risks of extremes may be changing very rapidly.

Introduction

The insurance industry is affected by climate change in a number of ways, although the effects may vary greatly between jurisdictions, owing to industry structure and practice as well as to climatic and geographical differences. Insurers are already encountering aggravated claims for insured property damage in extreme events, particularly floods, storms, and droughts. As yet, the main causes of the trend of rising property claims in recent decades are socioeconomic rather than climatic; however, the contribution of climatic change could rise quickly, owing to the strongly nonlinear relationship between climatic variables and damage, and the fact that a small shift in mean conditions can create a large change in extremes. The pace of change regarding weather extremes is fast.

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Climate Extremes and Society , pp. 248 - 278
Publisher: Cambridge University Press
Print publication year: 2008

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