Andrew Torrance, CEO of Allianz Cornhill in the U.K., has explained why companies cannot afford to ignore the effects of climate change. As reported on the Allianz Group Website – www.allianz.com – Torrance stressed that changes in the world’s climate are altering weather patterns and making sea levels rise. In addition he pointed out that “the overwhelming scientific consensus is not only that the change will be considerable, but also that it has already begun.”
He noted that recent initiatives, from the U.S., Australia, China and India, to deploy cleaner energy technologies signal the importance of the issue at the highest levels. He also pointed to British Prime Minister Tony Blair’s decision to put climate change at the top of the agenda at the recent G8 meeting as a further indication of its growing importance – especially to the insurance industry.
“The increasing unpredictability of the weather is making it more difficult for insurers accurately to assess the future cost of weather-related claims,” Torrance stated. “The UK this year has seen the mildest January for more than 15 years and there have been flash floods in Carlisle and North Yorkshire,” he continued. “Last week, Birmingham suffered a tornado of such intensity that the final cost to the insurance industry will run into millions.”
Torrance noted that although insurers have been accused of cashing in on climate change, they are more likely to regard it as a threat rather than an opportunity. Meteorological experts continue to predict changes in the intensity and distribution of extreme weather events, which willeventually cause premiums to rise, “if the severity and frequency of natural disasters escalate as predicted.” He cited the study by the Association of British Insurers (See IJ Website June 29) in support of his assertions.
It has therefore become increasingly important for the insurance industry to mitigate the impact of climate change. “First, it is important to understand and manage the risks in our own portfolios, not in an historical context but against a perspective of what can be expected in a warmer world,” Torrance continued. “More sophisticated risk assessment tools must be introduced. Working in partnership with policymakers to encourage effective practical action to mitigate the impact of climate change will also be crucial.
“Here in the UK, climate change particularly increases the risk of flooding which means that the government’s program to strengthen flood defenses is especially appropriate. It is not only the insurance industry that will be impacted by climate change. The most sensitive sectors are either energy-intensive – such as cement, aviation and metals, and energy industries such as oil, gas and coal-power utilities – or provide energy-consuming products such as automobiles.”
Torrance concluded: “Climate change will affect us all. It is only by recognizing this now and responding accordingly that we will be able to manage the outcome in a sustainable and effective way.”
The full text of his remarks, as well as additional information on climate change, may be obtained on the Allianz Website, as noted above.
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