Tuesday , June 22 2021

Insurance premiums increase as extreme weather conditions become more common



Updated

November 08, 2018 11:16:28

Owners of residential property and businesses are likely to face higher insurance premiums after a new actuarial index has warned of rising financial risks from extreme weather events.

Key Points:

  • The climate index is updated every year
  • Developed with regulators and natural risk scientists using national data
  • Potential losses due to coastal erosion are estimated at 88 billion dollars, excluding land value

The Australian Actuarial Climate Index looks at risk factors such as high sea levels, drought, burning fires, cyclones, floods and extreme temperatures as they are more frequent as the growing evidence of climate change rises.

The index, developed by the chief accountant of the actuarial business and Finity Consulting's chief consultant, Tim Andrew, warns that the extreme weather conditions this autumn are higher than the historical extremes in the autumn between 1981 and 2010.

"It is fair to say that this is a fairly new field for everyone and you can imagine that insurers are especially concerned that they have to receive adequate prizes for the risk they are taking," Andrew said for ABC's AM program .

"The index clearly shows that we have an increase in the frequency of extreme events and we have been expecting over time that many people who face flood and flood-prone areas are faced with rising premiums.

"One of the challenges for us is to make sure we build properties in the right places to make sure we minimize the impact in the future."

The Australian Prudential Regulatory Authority (APRA), which oversees banks and insurers, warned last year that climate change risks are "predictable, material, and actionable."

APRA Executive Director Geoff Summerhayes said the index was an important step towards a cross-cutting standard for the disclosure of the risks of extreme weather events and implications for business, consumers, developers and governments.

"We believe this initiative is a positive step to helping regulated entities understand and manage the potential impact of climate risk on their businesses," Mr. Summerhayes said.

The index – which will be updated every quarter and supported by the Meteorological Bureau and CSIRO – is based on similar clues currently used in Canada and the United States.

Executive Director of the Actuary Institute, Elayne Grace, said the index was a "first step" as actuaries develop more explicit measures on climate risk.

"We hope to build on this index by attaching risk data such as damage to property and health statistics to understand the relationship between extremes and weather risks, allowing the development of more explicit risk indicators," said Ms. Grace.

The index adds concern about future climate change losses after the Climate Institute warned in 2016 that potential damage caused by coastal erosion was estimated at $ 88 billion, excluding land value.

The index was developed in consultation with regulators and natural risk scientists with data collected at national level and grouped into twelve similar climatic reasons.

Tim Andrews wants to stay away from the policy surrounding cynicism about climate change but hopes that the move towards greater awareness will not be shadowed by cynics of climate change.

"This is inevitably a risk with these issues. I am often disappointed with politics and I hope this message will not be lost."

Topics:

business-economy and finance, –

insurance,

climate change,

Australia

First posted

November 08, 2018 10:42:08


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