Insurers unprepared for extreme weather: University of Waterloo study

A new study from the University of Waterloo finds that insurers are basing home insurance premiums on historical data, rather than accounting for the increasing frequency, severity and unpredictability of weather events due to climate change.

“As extreme events become more frequent, insurers that ignore climate change will not put away enough money to cover their claims,” said Jason Thistlethwaite, a climate change economist at the University of Waterloo. “To re-coup those losses, they’ll have to raise rates or pull coverage from high risk areas.”

The study, Insurance and Climate Change Risk Management: Rescaling to Look Beyond the Horizon, looked at data from 178 insurers. It found that reinsurers have done a better job of reacting and adapting to risks arising from climate change.

“Insurers are supposed to watch our backs by looking into the future and protect us from unexpected events,” Thistlethwaite said. “We pay to not worry about these things.”

A full version of the study was published in the British Journal of Management.

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know.

This story was originally published by Canadian Insurance Top Broker.