With the UK experiencing 10 destructive storms in less than six months, concerns among insurers regarding climate-related catastrophes have significantly increased.
A recent survey conducted by Gallagher Bassett, as part of its “Carrier Perspective: 2024 Claims Insights” report, found that 83% of UK insurers share this sentiment.
Ashley Easen (pictured above), director of risk and ESG at Gallagher Bassett, noted that the rising frequency and severity of floods, freezes, and storms have led to an increase in both the volume and complexity of claims, placing greater financial pressure on insurers.
In 2023, the UK saw approximately £27 billion in insured loss events, marking a yearly high. This total includes £16 billion in losses from severe convective storms alone.
With growing concerns about climate change and natural disasters, insurers are increasingly recognising the need to incorporate environmental factors and utilise advanced data analytics in their operations, according to Easen.
This approach involves analysing historical weather patterns and employing predictive modelling to anticipate future premium changes, identify insurable areas, and manage complex customer segments.
On a global scale, 67% of insurers report a moderate to heavy reliance on data analytics. In the UK, this figure is slightly higher, with 70% of insurers indicating they depend heavily on data analytics for risk assessment and underwriting.
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Despite the rising significance of climate change, only 46% of insurers worldwide have observed an increase in policyholder demand for climate-specific insurance products or coverage options.
Easen suggests that as the impact of natural catastrophes becomes more pronounced, this demand is likely to grow, making early preparations increasingly important for insurers.
The integration of environmental, social, and governance (ESG) considerations has also notably become a key strategic focus for companies. In the UK, 69% of insurers have intensified their efforts in this area, taking steps such as developing a clear ESG strategy and establishing dedicated ESG task forces.
According to Easen, creating an effective ESG plan requires the use of technology and analytics, enhanced employee training, and increased awareness, all underpinned by transparency.
“It is important for insurers to keep up with emerging regulations and ensure strict adherence to compliance. Collaboration with regulatory bodies and industry peers is crucial for addressing shared ESG challenges within the insurance sector,” Easen said.
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