Canadian Underwriter

Climate change affects insurance

September 13, 2005   by Canadian Underwriter

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Over the past 30 years loses resulting from catastrophic weather events are growing 10 times faster than premiums meaning that if the trend continues, the insurance industry may have to deal with a decrease in coverage and increased costs, according to a recent report commissioned by Ceres.
The report states that a trend of higher losses will lead to higher premiums and deductibles, lowered limits and broader coverage restrictions.
In the last decade, natural catastrophe losses have jumped from a few billion dollars a year in the ’70s to $15 billion a year.
The study mentions the devastating insurance impact of the recent Hurricane Katrina, stating that it will exceed the previous record high of $30 billion resulting from the 2004 hurricanes.
Drought, wildfires, floods and storms are examples of issues related to global warming that will affect insurability problems. According to the report, these environmental events may likely hamper many lines of business including automobile insurance, crop insurance and directors and officers insurance climate change can affect the financial performance and solvency of a company thus affecting D&O liability.
Improved loss data and analysis and increased used of risk management techniques are steps insurers can take to protect themselves against the potential risks of climate change. The study further recommends that insurance regulators raise standards for catastrophe modeling.

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