An insurance industry thinktank has warned that the warming of the oceans and extreme weather are changing the attitude of insurance and reinsurance companies, as parts of the world become “uninsurable”.
A report named Warming of the Oceans and implications for the (re)insurance industry by the Geneva Association, says that climate unpredictability is altering insurers’ risks assessment.
The organisation’s head John Fitzpatrick said, “Ocean warming has effectively caused a shift towards a ‘new normal’ for a number of insurance-relevant hazards.
“The shift is quasi irreversible, even if greenhouse gas emissions completely stop tomorrow, oceanic temperatures will continue to rise.”
The report outlined that extreme whether events – like the one that hit Oklahoma in May – as well as sea-level rise and floods, have become important features to consider during assessments.
However, because these events are often hard to predict, some areas, including parts of the US and UK, have become uninsurable.
“In some high-risk areas, ocean warming and climate change threaten the insurability of catastrophe risk more generally”, the report says.
“To avoid market failure, the coupling of risk transfer and risk mitigation becomes essential.”
Ocean warming is affecting both the primary insurance industry and the reinsurance sector, according to the report. It suggested that companies should improve internal risk management strategies but also put pressure on governments to accelerate mitigation measures.
The UN recently estimated that natural disasters have caused a $100 billion (£66 billion) loss in the last three years alone.