Although this year’s drought and record-high temperatures in the United States have not had the same financial impact as the tornadoes, hurricanes and floods that caused more than $30 billion in insured losses in 2011, many believe that the frequency of costly extreme weather events is growing due to climate change. And according to a report from the nonprofit advocacy group Ceres, insurers need to take a more active leadership role in responding to this threat.
“Just as the insurance industry asserted leadership to minimize building fire and earthquake risks in the 20th century, the industry has a huge opportunity today to lead in tackling climate change risks,” said Ceres president Mindy Lubber.
The report recommends that insurers encourage a combination of loss prevention, loss control and risk transfer (through insurance) to reduce the risk. This includes supporting research on extreme weather patterns and developing more accurate catastrophe models so that they can better price and underwrite these changing weather risks.
Insurers should also work with building planners to develop ways to strengthen vulnerable infrastructure and improve outdated building codes, as well as make efforts to promote the reduction of carbon emissions by encouraging policymakers to enact greenhouse gas legislation.