A combination of natural disasters and extreme weather events impacting the entire globe is likely to mean 2017 will be the most expensive on record according to 28 insurance industry organizations.
According to ClimateWise, a global network of 28 insurance industry organizations, not only is 2017 likely to be the most expensive year on record due to natural disasters and extreme weather events all over the globe, but over the past decade only 30% of catastrophic losses were insured, leaving a climate risk protection gap of $1.7 trillion.
“Our industry has been shaken by climate perils impacting urban centres and 2017 is on track to become one of the most expensive years on record,” said Maurice Tulloch, Chairman of Global General Insurance at Aviva and Chair of ClimateWise. “The climate risk protection gap presents insurers with one of our industry’s most profound challenges. The cost of extending sustainable insurance cover is now simply not affordable in many places. A proactive response is required.”
Many in America will still recall vivid memories of Hurricane Harvey, which hit Texas in August and caused $180 billion in financial losses. According to ClimateWise, Harvey was just one among many numerous events exposing the growing climate risk protection gap and the urgent need to improve the resilience of cities to better withstand the changing climate and natural disasters.
Further, Hurricane Harvey’s devastation further revealed the lack of insurance coverage for such events, with only one in five residents in Greater Houston having flood insurance — and insured losses amounting to less than $19 billion, or just 10.5% of total losses.
Unsurprisingly, the dangers and financial concerns are even greater in developing countries, such as recently seen in Bangladesh and India. The dangers only become more obvious and the need to increase the resilience of cities more urgent when you consider that 50% of the world’s populations now live in cities, and 1.5 million people are migrating to urban areas every week.
“Cities are at the epicentre of the climate risk protection gap crisis, given their concentration of economic activity and vulnerability,” said Tom Herbstein, ClimateWise Director.
“The challenge is how to extend insurance cover in a world where climate risk exposure continues to grow.
“While the climate risk protection gap presents a very real challenge for cities, there are also many opportunities for new partnerships and products. Insurers must start proactively exploring where, within their own value chains, and collaboratively across the industry, these opportunities lie.”
ClimateWise was set up by the University of Cambridge Institute for Sustainability Leadership (CISL) back in 2007 to help insurers and society respond to the growing risks of climate change. ClimateWise members have been working for a decade to benchmark their response to the protection gap in line with The ClimateWise Principles, first set up in 2007 and then revised in 2013.
“ClimateWise members are already on the front foot with regards to implementing the TCFD recommendations. They have been voluntarily considering and disclosing their strategic response to climate change for a decade,” said Mary Schapiro, Special Advisory to the Chair of the TCFD and former Chair of the US Securities and Exchange Commission. “The next step for them will be to begin the process of identifying and quantifying the financial impacts of climate change, exploring how resilient their strategies are to different climate scenarios, and encouraging others to do the same.”