Financial
Review, 15
November 2018:
Insurance giant IAG has
warned a failure to reduce greenhouse gas emissions could result in a world
that is "pretty much uninsurable", with poorer communities likely to
bear the brunt of the effects.
In Australia, IAG said
temperature increases of more than 3 degrees would expose greater swaths of
Queensland to cyclones and flooding, while a rise of more than 4 degrees could
make the risks to insurers prohibitive.
Timaru Herald, 26 May 2018, p.7:
Anyone now considering a
coastal property should know what sea level rise is.
If they already own one,
they shouldn't be surprised if buyers expect to know how it might affect them.
It's time to accept
these properties may come with some risk, and let government and other agencies
get on with the job of preparing without worrying about court battles over lost
capital gains.
It's an inconvenient
truth, but it appears that the value of flood- prone property will go down and
many coastal towns will face a new threat.
The
Sydney Morning Herald,
14 February 2018:
If any Australian
company needs to come clean over its climate risks, it’s QBE.
Not just so shareholders
can understand how secure (or not) their capital is as climate impacts
intensify.
This is about
Australians being able to see just how perilous our future has become without
urgent action to cut greenhouse gas emissions.
Last
October QBE said it expected 2017 to be the costliest year in the history of
the global insurance industry, flagging a $US600 million ($767 million) hit
to its pre-tax earnings. They weren't wrong, nor were they alone.
The triple-whammy of
hurricanes Harvey, Irma and Maria hitting the US and Caribbean contributed to a
record $US135 billion in payouts globally on natural disasters. Wildfires in
California made things worse and, for Australian general insurers, Tropical
Cyclone Debbie added to the pain.
Tom Herbstein, of
Cambridge University’s insurance industry-funded project ClimateWise, summed it
up in saying “climate change fundamentally challenges the existing insurance
business model.”
And understandably there
have been some drastic responses from within the industry. Hannover Re was even
forced to sell its entire stock portfolio, worth €953 million ($A1.5 billion) ,
prompted by natural disaster claims.
Costly natural hazards
are nothing new to QBE or indeed any of Australia’s big three general insurers.
Last year, individual
large claims and natural hazards cost QBE $1.7 billion, or 15 per cent of the
company’s net earned premium.
Compare this to the
seven year average of 8.1 per cent to 2010, and you get an idea why QBE called
it “unprecedented”.
Additionally, over the
past decade, IAG under-provisioned for natural hazard claims by almost $1
billion while Suncorp under-provisioned by $1.9 billion.
It appears none of our
general insurers are keeping up with the pace of climate change.
BACKGROUND
Excerpt from the
Insurance
Council of Australia’s Climate Change Policy:
The role of general
insurance is to assist policyholders to recover from losses, such as those
caused by extreme weather events. With expertise in risk management developed
over hundreds of years of operation, general insurers play a critical role in
communicating, managing and responding to the the risks that many policyholders
face today, as well as how those risks may evolve under a changing climate.
It follows that the
general insurance industry naturally supports community policy adjustments that
will enhance resilience to extreme weather, as well as measures that may assist
to reduce emissions.
Using the industry’s
expertise in the pricing, transfer and management of risk, the following
activities being undertaken by the industry are intended to assist
policy-makers and communities to address the implications of climate change:
Maintain
the strong prudential foundations underpinning the Australian market, to ensure
that the industry continues to be able to respond to large disaster events when
they occur.
Manage
the commercial, individual and community-level risks posed by climate change
via innovative risk-transfer solutions.
Ensure
that risk-transfer solutions deliver competitive price signals, through risk
based pricing, that assist communities and decision makers to recognise and
adapt to current and emerging extreme weather risks.
Assist
to increase community resilience over time by sharing industry expertise that
will help policy decision makers and the community to:
Reduce
exposures by making development control decisions for exposed locations that
are appropriate for both the location and the planned life cycle of the
development, accounting for the increased risk posed by the changing climate.
Reduce
vulnerability to natural disasters by implementing localised defensive
infrastructure where necessary to achieve an acceptable residual risk of damage
to an exposed community.
Reduce
vulnerability to natural disasters by improving building codes to ensure that
built structures remain viable following predictable events over their planned
life cycle, accounting for the increased risk posed by the changing climate.
Assist
policy-makers to understand the long term economic implications of climate
change, as well as the benefits of any appropriate emission mitigation schemes,
by providing credible data on current exposures and vulnerabilities, as
measured by the general insurance industry.
Assist
to implement practical solutions to emission reduction strategies, through the
consideration of risk-transfer products that incentivise solutions to be
brought to market by other industries.
This policy was approved
by the ICA's Board on August 4, 2016.
Coast
Adapt, 2015:
Climate change threatens
the viability of insurance in Australia and across the globe.
Despite a number of
recent ‘quiet’ years, a trend of increasing losses is apparent in Australia and
globally due to extreme weather events.
Insurers are covering at
a loss some parts of Australia that are considered disaster-prone.
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