The insurance sector continues to feel the impact of climate change as it drives more risks than ever before, according to Gallagher Bassett. As climate change worsens, the frequency and intensity of natural disasters have also increased – impacting how insurers evaluate risk.
Various risks are expected to emerge along the coastlines due to temperature change. A recent study published in Advances in Atmospheric Sciences 37(2), titled ‘Record-Setting Ocean Warmth Continued in 2019,’ estimates that the oceans are warming at the same rate as if five atomic bombs were being dropped every second, which could lead to significant risks of coastal flooding and extreme weather events.
“Not only will those along coastlines be more at risk of cyclone damage, but many more homes will also be at greater risk of damage from fires. Insurers need to be prepared to cover more flood-related damage in coastal cities, and health insurers see more incidents of heatstroke as summers get hotter and increase in duration,” Gallagher Bassett said.
“Insurance companies can start taking steps now to encourage better environmental practices. Even small investments in clean energy, reduced carbon footprints, and sustainable building can turn into huge savings in the future.”
Gallagher Bassett expects new types of insurance to emerge as climate change worsens.
“Green insurance is the largest of these new insurance types, and it's a wonderfully creative solution for insurers to create the kind of proactive change needed to slow the march of climate change,” the firm said.
“In essence, green insurance incentivizes customers to implement green initiatives in their own lives. Home and business insurance plans might cover the costs of adding new sustainable materials or offer premium discounts for those using clean energy.”