IMPACT OF CLIMATE CHANGE ON INSURANCE COMPANIES

IMPACT OF CLIMATE CHANGE ON INSURANCE COMPANIES

Impact of Climate Change on Insurance Companies

Change in climate is emerging up as a new type of issue in the security aspect because of the way it affects both the life and the well-being of human's in a highly interconnected and fragile world. (Evans, 1994, 107-128)

Changing climate is becoming a threat to the basic welfare and survival needs of humans across the globe, including the production of food, health, access to water and the utilization of land. Environmental deprivation rising from different kinds of economical activities of humans has increased the intensity and frequency of natural disasters throughout the world.

Around the world, there has always been natural development in the weather and climate events. In fact, the insurers have become experts in modelling the disastrous risks which has now become an incorporated instrument in the insurance industry. This has helped a number of businesses to digest the losses from unexpected natural disasters without important defaults. This has now led to the fact that insurance companies have become more refined in analyzing, managing and understanding their recent risks because of their natural disasters around the world. Many of the companies in United Kingdom are observed to be improving in managing and assessing their ways of dealing with the future trends and risks of the industry.

As a number of UK insurance companies have started to note it, depending on their previous weather conditions and patterns for planning out strategies for future. For this, they must identify the probability of losses and gains related to weather conditions. The impact of climate change is on a very wide range from increased amount of hurricanes, fires and floods to health and life getting affected by changing patterns of hot and cold weather. (Evans, 1994, 107-128)

Physical impacts' effect on insurers:

Companies of insurance and reinsurance are likely to face the strong impact of the changes in climate more than other parts of the financial businesses. There are a number of examples where it is seen that that how extremely weather condition can affect the insurance companies, the government and the sectors at backstops. Whilst there are examples of how the weather changes are affecting the insurance industry because of the flexibility of the insurance sector, in other ways it is quite well positioned in adapting the changes in weather events and patterns. (David, 2007, 28-38)

Threat of climate change for insurance industry:

The main threat that is facing the insurance industry is climate change. This threat affects both property and casualty insurance that the insurance people. Another concern: the two sectors will have to adapt to demographic change that is looming. This emerges from a study by Ernst & Young, in collaboration with Oxford Analytica. Ernst & Young has compiled a top ten list of threats that will confront insurers after interviewing twenty industry leaders worldwide.

According to Ernst & Young, climate change tops the list because global warming is changing the climate and increases the likelihood of ...