The insurance industry should do more to address the growing impact of climate change-induced damages, according to a new report by the World Wildlife Fund (WWF) and the Allianz Group, one of the world’s largest insurance providers.
The report, Climate Change and Insurance: An Agenda for Action in the United States, examines the latest scientific findings about climate change, including the impacts of forest fires, storms and floods, and the potential impact on the insurance industry and its customers.
Rising sea levels, intense hurricanes and frequent, larger forest fires could make insurance unaffordable for customers in high-risk areas. In fact, insurance premiums in states vulnerable to hurricanes are already increasing, and in some cases, insurers are exiting these markets altogether.
Allianz and WWF intend to engage the insurance industry, governments, regulators and others to better manage the risks associated with climate change.
One key recommendation for addressing the potentially adverse consequences of climate change in the US is for both governments and insurance companies to help correct market distortions and communicate appropriate signals to homeowners, businesses and consumers moving into high risk areas. The report points to the need by regulators to consider carefully the impact of programmes, like the National Flood Insurance Programme, which keep insurance rates artificially low. By masking the real price of risk, such policies encourage overdevelopment in high risk areas.
In addition, the report suggests US insurers begin incorporating future potential climate change impacts, such as continued sea-level rise and longer fire seasons into planning, rather than relying only on historical data of past weather events.
The report also recommends that insurers influence land-use development and planning in high risk areas. For example, conserving coastal mangroves provides a natural buffer from storms, surges and waves, while forest preservation can reduce mudslides.
Another way to minimize losses related to climate change is to promote storm-resistant and energy-efficient building materials, improved building codes, and better public education about their benefits.
Fireman’s Fund Insurance Company, a unit of Allianz AG (Charts), this Fall plans to introduce commercial insurance policies designed to support and encourage the development of “green” buildings that save energy and reduce emissions of greenhouse gases. One of the products will provide a discount to LEED (Leadership in Energy and Environmental Design) or Green Globes certified buildings.
A second commercial property product will upgrade customers to energy efficient or “green” products when replacing damaged items such as roofs, windows, equipment, lighting systems and hot water heaters. And, a third product will provide commissioning coverage to inspect systems such as HVAC after installation for proper installation and efficiency.
“Our new products will promote energy efficiency, resulting in a reduction of greenhouse gas pollution as well as cost savings for our customers,” said Chuck Kavitsky, Chief Executive Officer of Fireman’s Fund.
“Energy-efficient construction can also help make buildings and homes more resilient, while double pane windows are less likely to shatter during fires. A lot of building owners are concerned about climate change but don’t know what to do. Here’s one thing building owners can do that addresses more than their bottom line.”
In line with the report’s recommendations, Allianz is taking several actions to help develop solutions for its customers and the industry as a whole. These include investing $600 million in renewable energy projects over the next five years, introducing a new tool based on Google Earth in the US to help customers better manage their exposure to natural catastrophes, and cutting its own greenhouse gas emission by 20 per cent by 2012. Allianz is also planning to begin developing new products that address global warming and will start researching ways to integrate the anticipated potential future impacts of climate change into its risk models.
Loading...