Sandy brings climate change to the fore

Superstorm Sandy has served as timely reminder that insurers need to embed climate change into their underwriting processes, pricing and capital management, PwC has warned.

They also need to develop new products and services in response to an increasing level of natural catastrophes, according to the fifth independent review of ClimateWise members conducted by the accounting firm.

The report found that a leading group of insurers were at the forefront of integrating climate change into their business. It also highlighted green investments in mitigation and resilience which can save costs for insurers and reduce risks for consumers in the future.

PwC partner, sustainability and climate change Jon Williams said: “With a rise in global temperatures of 6⁰c a real possibility by 2100, it is clear that insurers will need to take account of increasing climate unpredictability in their business models and convert the associated risks to opportunities.

“Hurricane Sandy remains a timely reminder that climate change will bring more extreme and unpredictable weather and with it, significant insured losses. Insurers can be seen as both drivers of change to reduce the risk and an industry that helps rebuild and protect local communities in times of difficulty. They need to do more to embed climate change into their underwriting processes, pricing and capital management whilst at the same time develop new products and services that respond to an increasing level of crises.

“This is particularly the case in developing markets, where the impact of climate change is potentially greater and needs to be better understood and managed.

“The best performing insurers in the future will be those that have promoted ways to reduce the impact of climate change, developed products to help their customers manage the effect of a warmer world and have also adapted their businesses to be resilient to the risks.”

ClimateWise chairman John Coomber said: “Insurers like seat belts, sprinkler systems and fire escapes. Climate change will over time produce major changes in weather-related risk experienced by our customers. This will drive a new dialogue with our customers and with government as we seek to build resilience to the new patterns of risk emerging and protect our customers from risk that cannot be mitigated.”