Insurance affordability and coverage threatened by climate change

Broad and continuous efforts are needed to prevent climate change-related events from triggering sudden withdrawals or steep price hikes within the insurance industry, according to a recent study by Climate Service Center Germany.

Rising climate-related risks such as from floods and windstorms threaten affordability and coverage availability for society at large. The solvency of the insurance industry as a whole doesn’t seem to be threatened by climate change. However, extreme hydro-meteorological events might compromise the ability of insurance companies to deal with climate impacts and increase the costs of doing business in the insurance sector. This could result in companies exiting the market or certain segments becoming uninsurable.

After extreme hydro-meteorological events, insurers tend to critically reassess their risks if pay-outs were higher than estimated. This reassessment could result in decreased affordability and availability of insurance. For example, after the 2002 German floods, which cost €9 billion in public funds, some observers noticed that the risk reassessment by insurance companies led to an increase in premiums of up to 50 per cent, and a reduction in areas where flood insurance was offered of 10–20 per cent. In the US, insured losses of over $100 billion caused by Hurricane Katrina and others during 2004 and 2005 resulted in a decrease in the availability of insurance. In the UK, the end of ‘universally available’ flood insurance coverage was mostly motivated by damages over £1 billion during the 2000 autumn floods, while in Ireland a series of recent floods have left businesses and homeowners in certain areas struggling to secure flood insurance.

Therefore, continuous efforts are needed to address underlying risks, monitor trends, and seek innovative solutions to prevent extreme hydro-meteorological events triggering sudden withdrawals or steep price hikes. This needs to include broader measures, often not under direct control of the insurance industry, such as adjustments to building standards, stringent land-use planning, and policyholders investing in risk mitigation measures. This is a continuous process that requires monitoring, learning, and innovating. This comes at a cost to the insurance industry, but it is a necessary investment to secure future markets.

The article first appeared on Climate Change Post and is a digest of a scientific paper by Cremades et al., 2018. Nature Climate Change 8: 2-12.

 
Location
Germany
Related Goal
Goal 10: Mainstream climate in financial markets
Articles you may be interested in
In The News
First European cluster accelerator programme launched in Frankfurt

How to take clusters to the next level and...

First European cluster accelerator programme launched in Frankfurt
Innovation Spotlight
Ioncell’s fiber innovation could help drive the circular economy transitio...

The textile, garment and fashion industries generate tonnes of pollution each year and recycle very little, which...

Ioncell’s fiber innovation could help drive the circular economy transition
Opinion
The challenge of redesigning venture capital
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
The challenge of redesigning venture capital
In Detail
Clean and Healthy Construction

Insights from the C40 World Mayors Summit in Copenhagen: Master Class and Market Dialogue for Clean and Healthy Construction. Why clean construction? Kevin Austin,...

Clean and Healthy Construction
Opinion
If we have figured out transformation, why is the world still in such a mess?
Susannah Fisher Research, EIT-Climate-KIC
If we have figured out transformation, why is the world still in such a mess?
Opinion
The tyranny of categorisation
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
The tyranny of categorisation
Opinion
EIT Climate-KIC strengthens biodiversity through systems change
Felicity Spors Head of International Affairs, EIT Climate-KIC
EIT Climate-KIC strengthens biodiversity through systems change
Opinion
Why our cities must act as beacons for ambitious climate action
Tom Mitchell Chief Strategy Officer, EIT Climate-KIC
Why our cities must act as beacons for ambitious climate action
In The News
Biggest-ever global hackathon to tackle climate breakdown

Over 100 Climathon events around the world turn grassroots...

Biggest-ever global hackathon to tackle climate breakdown
In The News
Global call for transformative solutions to tackle the climate emergency

EIT Climate-KIC launches Climathon Global Awards and Healthy, Clean...

Global call for transformative solutions to tackle the climate emergency
In The News
EIT Climate-KIC supported crop insurance project acquired by world’s largest...

The insurance sector is well aware of the rising...

EIT Climate-KIC supported crop insurance project acquired by world’s largest re-insurer
In The News
EIT Climate-KIC innovators celebrated at 2019 EIT Awards

The European Institute of Innovation and Technology (EIT) has...

EIT Climate-KIC innovators celebrated at 2019 EIT Awards
Opinion
Part three: Climate action #NotinNewYork
Andy Kerr Director, UK & Ireland, EIT Climate-KIC
Part three: Climate action #NotinNewYork
In Detail
New EIT Climate-KIC supported report finds digital technologies can vastly a...

As part of the UN Climate Action Summit, the Global Enabling Sustainability Initiative (GeSI) and Deloitte launched a report today, supported by EIT Climate-KIC,...

New EIT Climate-KIC supported report finds digital technologies can vastly accelerate the SDGs
Opinion
Part two: Climate action #NotinNewYork
Andy Kerr Director, UK & Ireland, EIT Climate-KIC
Part two: Climate action #NotinNewYork
Opinion
Climate action #NotinNewYork
Andy Kerr Director, UK & Ireland, EIT Climate-KIC
Climate action #NotinNewYork
In The News
Circular Cars Initiative launched at United Nations Climate Action Summit

On the occasion of the United Nations Climate Action...

Circular Cars Initiative launched at United Nations Climate Action Summit
In The News
We’re closing for business in solidarity with #ClimateStrike

EIT Climate-KIC will close this Friday 20 September, the...

We’re closing for business in solidarity with #ClimateStrike
In The News
Open Innovation Call targeting air quality and urban heat island effect launch...

The City of Copenhagen’s department Resilient and Sustainable City Solutions within...

Open Innovation Call targeting air quality and urban heat island effect launched
In The News
EIT Climate-KIC cleantech start-up ZOLAR attracts 10 Million Euro Investment

The Berlin-based start-up Zolar raises a 10 million EUR...

EIT Climate-KIC cleantech start-up ZOLAR attracts 10 Million Euro Investment
In The News
Breaking down barriers to climate-finance: the City Finance Lab launches secon...

Competition for the five most innovative financing solutions for...

Breaking down barriers to climate-finance: the City Finance Lab launches second call for proposals
Opinion
Innovating in complexity: Systemic investing
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Innovating in complexity: Systemic investing
In The News
Climathon onboard ‘Sail to the COP’

On 2 October, 36 young climate change agents will...

Climathon onboard ‘Sail to the COP’
In The News
Research reveals surprising link between socio-economic indicators and sustain...

A new study by EIT Climate-KIC partner academic institutions...

Research reveals surprising link between socio-economic indicators and sustainability transition
Opinion
Transformation capital: A new investment logic for catalysing systems change
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Transformation capital: A new investment logic for catalysing systems change
Opinion
Innovating in complexity: From single-point solutions to directional systems innovation
Dominic Hofstetter TRANSFORMATION CAPITAL, EIT CLIMATE-KIC
Innovating in complexity: From single-point solutions to directional systems innovation
In The News
Four EIT Climate-KIC innovators nominated for annual EIT Awards

The European Institute of Innovation and Technology (EIT) has released...

Four EIT Climate-KIC innovators nominated for annual EIT Awards
In Detail
Report offers recommendations for development of agricultural impact tool

A new report supported by EIT Climate-KIC’s CSA Booster programme proposes technical, governance and business arrangements for the development of a new tool for...

Report offers recommendations for development of agricultural impact tool
In Detail
Food value chains strategy report offers recommendations based on systemic i...

A new report details the work of EIT Climate-KIC and its partner Metabolic, a consulting company using systems thinking to tackle major sustainability challenges,...

Food value chains strategy report offers recommendations based on systemic impact
In The News
EIT Climate-KIC supports digital roadmap for a circular economy

EIT Climate-KIC, along with several European stakeholders, is advocating...

EIT Climate-KIC supports digital roadmap for a circular economy