UN Climate Chief: Insurance Industry Unprepared for Climate Change

November 29th, 2015  |  Canadian Business

Climate change impacts insurance

As global leaders met in Paris to talk about climate change, some policymakers are concerned about what could be next for the world – and the insurance industry.

According to the Executive Secretary of the UN Framework Convention on Climate Change, the global insurance industry is completely unprepared for effects of the changing climate, reports Bloomberg.

Executive Secretary Christiana Figueres delivered her remarks to the Association of British Insurers in London last week. She said that there are already greenhouse gases in the atmosphere, and that any deal reached by world leaders in Paris won’t be enough to stop some of the changes coming to the world’s climate – and it won’t stop some of the impacts such changes will have on commerce.

Global insurance is already overloaded

Many scientists expect to see more extreme weather moving forward, although most of the evidence points to causing droughts, coastal flooding, and heat waves, rather than hurricanes and tornadoes. However, even those types of events can cause damage in ways that could impact the insurance industry. As commerce is affected and as property damage and loss becomes more real, insurers will be forced to pay out – and that impacts the industry as a whole.

Figueres thinks that insurers are wholly unprepared for the impact that sustained climate change will have on the world. Consider the way Hurricane Katrina impacted the insurance industry in the United States. It didn’t help that other large natural disasters followed in Katrina’s wake, including super storm Sandy not many years after.

“The system is already overloaded and from an insurance perspective, I would say, all alarm bells are ringing,” Figueres said, according to Bloomberg. “The insurance sector is perhaps ready for some natural disasters, but it’s not ready for climate change, which is a systemic threat.”

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