Global insurance industry has begun to retreat from regions badly affected by climate change

Almost as soon as federal, state and local governments around the world began to consider what climate change might mean to them, it became obvious the insurance industry had been do the same for some time and had considered its options - at one point expressing a view that residential premises within the coastal fringes might become uninsurable and the land on which these homes were built would be rendered worthless by climate change.

Now QBE is turning that prediction into a reality.......

The Sydney Morning Herald, 17 February 2020:

Global insurance giant QBE has warned climate change poses a material threat to its business and the entire economy as its chief executive Pat Regan said premiums were at risk of becoming too high in areas exposed to repeated, extreme weather. 

QBE has been forced to cut operations in countries where the climate risk is too high and Mr Regan said severe weather means customers in certain [areas] may be priced out of certain types of insurance in Australia and around the world. 

"We got out of places like the Philippines, Thailand, Chile, Puerto Rico [where] it was just too much climate change weather impact risk there that the risks just weren't worth it," Mr Regan said. 

Mr Regan said there had always been parts of the world that were difficult to insure, but as floods and fires become have dominated headlines this summer, this risk was increasing across "swathes of Australia" and could potentially price out customers from home and business property insurance. 

Mr Regan said climate change was a "big topic" in the sector, requiring the insurance giant to "up its game on a number of fronts". QBE boosted its reinsurance program for catastrophic events to $2 billion in a process that would be reassessed each year, Mr Regan said. 

"What that means is you could have a one-in-200-year storm and we'd be protected," Mr Regan said. 

"Whatever your more broad thoughts on climate change are, the evidence is clearly there that the frequency and severity of weather events is increasing over time. 

"The evidence is there for all to see that the amount of weather events globally, not just in Australia, is consistently rising and most of the worst years on record have happened in the last 10 years."  [my yellow highlighting]

ABC News, 3 January 2020:

....the number of “uninsurable” addresses in Australia is projected to double by the turn of the century to nearly 720,000 — or one in 20 — if nothing is done to address escalating risk from extreme weather and climate change. Thousands more will see their insurance premiums double or even triple within decades, the data reveals.....

In Newcastle-Maitland, NSW, the number of uninsurable addresses will rise five-fold by 2100, to nearly one in seven.....

On the Gold Coast, increased risk from flooding and inundation will push the number of uninsurable addresses to 64,000 by 2100 — or one in six. 

In Palm Beach, Broadbeach Waters and Bundall, more than half of addresses are projected to become “uninsurable” by 2100.

Financial Review, 27 October 2019:

Extreme weather has been making strata property in north Queensland very difficult to insure....

Strata insurance is the insurance that covers entire apartment complexes, as opposed to individual houses. As one insurer told The Australian Financial Review, large complexes pose much higher risks than single houses.....

Assessing the risk to these properties is difficult, and a number of insurers have simply stopped trying. Suncorp, one of the big three ASX-listed general insurers, falls into this category. It no longer underwrites complexes with more than 10 units, or an insured value of more than $5 million. QBE, Zurich and the major reinsurers have also pulled out.

Australian Parliamentary Library, Records of the Parliamentary Commission of Inquiry, "Inquiry into climate change and environmental impacts on coastal communities", October 2009:

Climate change is projected to have a major impact on the frequency of extreme weather events, with the coastal zone being particularly vulnerable in this regard because of the combined effects of sea level rise and storm surge/flooding events. 

In its submission to the inquiry, the peak body for the insurance industry, the Insurance Council of Australia (ICA), noted that: 

more than 425,000 Australian addresses are below 4 metres above mean sea level and within 3km of the current shoreline. Within the Greater Sydney region (Newcastle to Wollongong), 46,000 addresses are identified as being within 1km of the shoreline and with elevations less than 3m. 

The ICA further observed that the majority of these vulnerable addresses are located near ocean-connected coastal waters—that is, alongside lakes, river banks and estuaries—and that properties in coastal settlements which are also on inland floodplains ‘can be liable to both river and ocean inundation, often concurrently’. 

Climate change could have adverse impacts on insurance affordability and availability, compounding the problem of under-insurance: 

Around 23 per cent of Australian households (1.8 million) are currently without building or contents insurance. As insurance premiums rise, more households may opt out of insuring, putting an added burden on governments and communities when disasters occur.