By Acclimatise News
The people who are responsible for calculating insurance risks and premiums have ranked climate change as the top risk for 2019. Actuaries rated climate risk as a bigger threat to insurers than cyber-crime, financial instability, and terrorism.
The survey, published by the Joint Risk Management Section, found that over a fifth of the 267 actuaries surveyed, identified climate change as their number one emerging risk. Climate change was also the most significant combination risk, and importantly, was also tied first (with cyber/infrastructure) for the top current risk, putting paid to the idea that climate change is an issue for the future.
As one might expect, the insurance industry is ahead of the curve in terms of assessing climate risk exposure. However, because it is able to adjust its premiums regularly – typically on an annual basis – it is able to account for climate risk. Policy holders on the other hand, will see their premiums rise inexorably, until there is an unaffordability crisis.
Actuaries that are able to correctly account for climate risks are able to include price signals in premiums ahead of time, helping to encourage investment away from areas of high climate exposure. This would include, for instance, reckless lending on coastal real-estate in areas vulnerable to sea level rise.
The survey is a good indication that concern about climate risk is growing in the industry. Last year, fewer than one in ten respondents rated climate change as the top emerging risk.
Download the survey report here.