Insurers are taking steps to address climate change
When it comes to climate change, insurance can be a tricky subject. The global insurance industry does not typically deal in “what ifs” and many large insurers are not willing to debate whether or not climate change is real. These insurers are more apt to address the issue of climate change by offering new insurance products and finding ways to mitigate the risks associated with the phenomenon. Powerful storms, rising temperatures, and depleting food and water resources are becoming issues that the insurance industry is beginning to involve itself in.
A changing climate represents a costly problem for insurance companies. Climatic phenomena are leading to a higher frequency of powerful storms that are proving to be devastating in nature. These storms are costing billions of dollars worth of damages and insured losses. Insurers have been noting the increasing frequency in these natural disasters, suggesting that climate change is to blame for the problem, but these concerns often go ignored or become fuel for political debates. As such, insurers are beginning to take steps to design products that are specifically related to climate issues, such as extreme flooding from rising sea levels and powerful storms.
How the insurance industry is reacting to climate change is not consumer-specific. Insurers are not simply changing their property insurance policies to take into account the effects a changing climate may have on the world. There are some companies that are offering displacement insurance for those that could actually lose their homes because of climate change. This coverage is becoming particularly popular among island nations that could at some point in the future disappear because of rising sea levels.
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Some risks are becoming so profound that insurers are simply abandoning certain sectors. Flood insurance is one such sector that insurance companies have been loath to participate in for several years. Floods are one of the most costly natural disasters in the world and represent a serious financial risk for the insurance industry, especially when the increasing frequency of powerful storms is favored in.
While the industry is well suited for addressing and overcoming certain risks, it has yet to find an effective way to offer protection against the myriad issues relating to climate change.