The Impact of Climate Change on Business Insurance
Some people think natural cycles cause climate change. Others argue that human action warmed the planet. The Insurance Information Institute (III) says the reasons may not matter to insurers. Business insurance companies care about managing risks. They need to predict future claims. The impact of climate change may impact how customers make claims.
How Are Business Insurance Companies Reacting to Climate Change?
Insurers may not focus upon climate change reasons. They don't claim to be scientists with solutions to stop it or explain it. However, some play a role in future planning. The III pointed out some steps that insurance companies have taken to manage risks:
- Raising awareness
- Urging prudent land use and better planning
- Investing in strong building codes and renewable power
Groups of insurers have also gotten together to study how climate change impacts business. Many in the insurance industry accept the reality of climate change, even if they do not assign blame.
How Can Climate Change Impact Insurance?
A study from the University of Vermont looked at historical data and anticipated rates of climate change to try to predict the physical and financial impact of future storms. This recent study merited enough attention from insurance professionals to merit an overview in the October 2017 issue of the Business Insurance online journal.
The researchers believed that property claims could rise by 70 percent or more by 2100. One of the co-authors, David Rosowsky, said he didn't believe that warmer temperatures had necessarily generated more storms. He said, however, that the storms had grown larger and traveled to unexpected places.
It's not hard to find recent evidence to support this study. Consider some examples:
- Houston gets its share of hurricanes and floods. Still, Hurricane Harvey flooded many places that had not flooded in recent history. The city did not even suffer the full brunt of the winds but had trouble absorbing days of constant rain. The U.S. Weather Service called Harvey the worst flood in Houston's history and possibly one of the worst natural economic disasters in U.S. history.
- A strong windstorm struck Ireland and England, two places that aren't famous for tropical-style storms. Ireland, for example, has no record of a worse windstorm than Ophelia.
Insurance companies can't change the weather. They can try to predict it in order to help better determine risks and manage premiums. The data that commercial property insurance companies gather can also benefit their clients. Both insurance companies and property owners can use this information to better plan for the future.
For more information, call Buckley Insurance Agency at 469-388-1443.
Source: Insurance Technologies Corporation