Insurance Industry Response To Climate Change
Those familiar with the insurance industry will know that it can sometimes be resistant to change.
For example, the insurance business was slower to adapt to the digital arena than some other industries. But the rising insurance-related costs associated with climate change have gotten underwriters’ attention.
The number of major annual natural catastrophe events in the United States alone tripled between 2010 and 2020 (from 7 to 21), and the 5-yearly average cost of such events more than quadrupled (from US $30.5 billion in 2015 to US $126 billion in 2020).1
As we have seen this year, many other locations around the world are experiencing extreme weather events, causing enormous harm and costing insurers hundreds of billions of dollars in claims.
In addition, enormous business interruption claims caused by the COVID-19 pandemic have prompted the industry to focus more intently on the clash between natural and man-made risks. The difficulty in predicting when disasters and pandemics will strike, and what their ultimate costs will be, has made it doubly difficult for insurers to allocate adequate reserves for future losses.