Insurers warn of climate change threat

The Association of British Insurers said climate change was not simply an issue for the future, but was already affecting insurance, with household claims for storm and flood damage doubling in the five years to 2003 to £6 billion.

A new report from the ABI entitled "A Changing Climate for Insurance" warned that insurers faced the prospect of these claims tripling by 2050 if no action was taken.

It found that during the 1990s extreme hot or cold weather was experienced during 34 months, compared with just 12 months during the previous decade, while the number of winter storms in the UK doubled over the past decade. The report added that by the end of the century two out of three summers could be as hot as the heatwave of 1995, while winters were likely to become wetter.

The ABI called on the Government and other stakeholders such as builders and developers to work with insurers to help reduce the impact of climate change.

Measures that could be taken ranged from improving flood defences, to ensuring new housing was not built on land liable to flooding or subsistence, and improving building standards to ensure properties were more able to withstand storms and strong winds.

Insurance impact

The ABI warned that unless action was taken it would become increasingly difficult for insurers to continue to offer cover to everyone at an affordable rate.

The report also highlighted that it was not just household insurance that could potentially be affected by climate change.

It said other cover could be hit, such as liability insurance if company directors were held responsible for their firms' contributing to climate change, and motor insurance, as extreme weather tended to lead to more accidents, and even health insurance.

John Parker, head of general insurance at the ABI, said: "Managing the impacts of climate change is a major challenge for society. We already live with its effects every day.

"Insurance is in the front line of climate change. Managing risk is central to our industry, and insurers must be equipped to analyse the new risks arising from climate change, and to help customers protect against them.

"The report provides the industry with a platform to ensure that appropriate action is taken by insurers, Government and other stakeholders to effectively manage climate change."

Government response

Reacting to the report, the Government's environment minister Elliot Morley said: "The insurance industry is right to point out the potential impacts on its businesses and customers and I welcome their report. The industry, with its expertise in managing risk, is an important contributor to tackling climate change."

However, he went on to say that the causes of climate change needed to be tackled through international agreements.

"The UK ratified the Kyoto Protocol in 2002 and we are also committed to achieving our more challenging goals of reducing carbon dioxide emissions by 20% below 1990 levels by 2010 and by 60% by 2050," he said. "We have already increased the annual spending on flood defences from around £300 million in 1996/97 to over £400 million in 2004/05."

Mr Morley added: "The Foresight Report on flooding, commissioned by Government and published last month, was a valuable contribution to the debate and will feed into the 20 year strategy that Defra is drawing up to set out the direction of future flood management policy."

Angie Bell