Warning to brokers to beware increasing flood risks

Companies in the UK and around the world are sleep-walking into a catastrophe around environmental risk.

This is according to Zurich’s group chief risk officer Alison Martin, who spoke to Insurance Times at the World Economic Forum’s launch of the Global Risks report in London yesterday.

Environmental risks continue to be among respondents’ biggest concerns over what are the biggest global risks.

All five of the environmental risks the report tracks are again in the high-impact, high-likelihood category: biodiversity loss; extreme weather events; failure of climate-change mitigation and adaptation; man-made disasters; and natural disasters.

Martin told Insurance Times that brokers must advise their clients on the increasing risk. She said brokers should take particular notice of the flood risk in the UK.

“We will see increased storm activity,” Martin warned. “Not necessarily increasing frequency of storms, but increasing activity in the storms themselves. That means rain and that means flood.

“Those are risks that we recommend people most quickly ensure they are ready for.”

Prepared

She said in future years insurers should be better prepared for more cold snaps like the Beast from the East weather event which took a hit on many underwriters in 2018.

And key to this is customers taking risk-mitigation steps. Martin said that every customer should have a climate resilience adaptation strategy to deal with adverse weather at home and abroad if, for example, an earthquake in Thailand affected the supply chain.

Martin added: “If we see the physical effects of climate change then sadly we will see greater claims costs.

“That is unless people choose to move away from where the risk areas are. If we move away from coastal areas and floodplains that may reduce some of the risk.

“Conversations need to have with customers on looking at their climate risk assessments – how exposed are they, what might happen to them in future.”

World Economic Forum’s Global Risks findings

Top 5 Risks by Likelihood

1.        Extreme weather events (e.g. floods, storms, etc.)

2.        Failure of climate-change mitigation and adaptation

3.        Major natural disasters (e.g. earthquake, tsunami, volcanic eruption, geomagnetic storms)

4.        Massive incident of data fraud/theft

5.        Large-scale cyberattacks

 

Top 5 Risks by Impact

1.        Weapons of mass destruction

2.        Failure of climate-change mitigation and adaptation

3.        Extreme weather events (e.g. floods, storms, etc.)

4.        Water crises

5.        Major natural disasters (e.g. earthquake, tsunami, volcanic eruption, geomagnetic storms)

 

Top 5 Risk Interconnections

1.        Extreme weather events + failure of climate-change mitigation and adaptation

2.        Large-scale cyberattacks + breakdown of critical information infrastructure and networks

3.        High structural unemployment or underemployment + adverse consequences of technological advances

4.        High structural unemployment or underemployment + profound social instability

5.        Massive incident of data fraud/theft + large-scale cyberattacks

5.        Failure of regional or global governance + interstate conflict with regional consequences

 

Top 5 Trends

1.        Changing climate

2.        Rising cyber dependency

3.        Increasing polarisation of societies

4.        Rising income and wealth disparity

5.        Increasing national sentiment