A rise in global temperatures could lead to more expensive and harder to obtain property insurance in the United Kingdom and throughout the world, according to a new report published today by the Association of British Insurers (ABI). In the U.K., predicted temperature changes could significantly increase the insured cost of flood damage. The cost of windstorm damage is also likely to increase, says the report.
Catastrophe risk modeling companies AIR Worldwide Corp. and weather forecaster Met Office produced the ABI report, “The Financial Risks of Climate Change.” Using current climate and insurance catastrophe models, it examines the financial implications of the widely predicted temperature increases of two, four and six degrees Celsius on the insured cost of flood and windstorm damage in the U.K., and of typhoons in China.
The study highlights that:
- In the United Kingdom, the average annual insured losses from river flooding and flash floods could rise by 14% to £633 million, based on a four-degree rise in global temperatures, which could occur as early as 2060. The average annual windstorm losses could rise by 25% to £827 million, due to changes in “storm tracks,” along which cyclones travel.
- The insured cost of extreme flood losses occurring on average once every 100 years in Great Britain could rise by 30% to £5.4 billion. The costs of windstorms occurring on average once every 100 years could rise by 14% to £7.3 billion.
- Wales and the southwest region of the U.K. could be most badly affected. In the southwest, average annual flood and wind damage insured losses could rise by 29% and 24% respectively.
- In China, average annual insured losses from typhoons could jump by 32% to £345 million, based on a global temperature rise of four degrees.
“These findings have serious implications for insurers, householders, businesses and governments,” Nick Starling, the ABI’s director of general insurance and health, said. “The continued widespread availability of property insurance in the future depends on taking action now to manage the threats of climate change.”
Stating that a two-degree temperature rise may be inevitable, Starling noted that further increases could be limited.
“The clear message to world leaders meeting at the UN’s Copenhagen Climate Change Summit in December is that they must reach agreement on ambitious emission reduction targets,” he said. “And, closer to home, the U.K. government needs to push ahead with the Flood and Water Management Bill, and ensure long-term investment in flood management as a priority, so that the long-term flood risk is better managed.”
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