Today climate change due to global warming is hot topic not amongst only environmentalist, industries but also for insurance companies.
A new report is published on the topic which assessed the 41 insurance firms of UK Insurance Industry who have signed up to the ClimateWise initiative, a coalition designed to help co-ordinate the sector's response to climate change. The report has concluded that Insurance companies should be doing more to exploit the opportunities presented by climate change through the development of new products such as cover for carbon markets and rainforests.
Moreover, despite widespread acceptance that climate change risks, such as the increased frequency of severe weather events and rising sea levels, will pose a major threat to property and businesses, many insurers are still not considering climate change risks when developing corporate insurance policies.
It is suggested that research into the dangers of climate change is playing an important part in public policy making, while half of insurers have designed products or services to help customers reduce their carbon emissions.
In this direction, last week The European Commission announced €24.5m (£20m) in funding to a new World Bank-backed scheme designed to allow developing countries to take out insurance against the increased risk of climate-change related storms and extreme weather events.
Thus, Commission is the first donor to the Global Index Insurance Facility (GIIF), a scheme set up by the World Bank's International Finance Corporation (IFC) and intended to make it easier for African, Caribbean and Pacific countries to access insurance cover for extreme weather events.
It is expected to prove more effective than traditional insurance cover for developing countries because it does not require detailed and costly damage assessments and is based on easily verifiable indices, limiting the likelihood of payment disputes. As a result insurers enjoy lower costs and payouts can be made more swiftly to affected firms and populations.
The World Bank is hoping that the approach can provide a model for the insurance industry to emulate.
1. Insurers urged to offer cover for carbon markets
2. EU backs climate change insurance model for developing world