Insurance denial amid climate change

We explore today how insurance denial amid climate change will impact assets and other aspects of business. In particular, we think at fires like the Australian bushfires and Fort McMurray (Canada) fire in addition to increasing rains leading to flooding.

These will undeniably be a ‘big drag’ on growth and have already generated invaluable losses to biodiversity. Furthermore, insurance denial will become a  problem as we discussed back in 2016 and even as far as 2009.

Insurance denial amid climate change

Lately Canadians are starting to understand the deep implications of insurance denial amid climate change. For example, in Fort MacMurray Canada fires in May 2016 consumed 10 per cent of the buildings and forced 88,000 people from their homes for at least a month. As a result many buildings are denied renewal by their insurers, and hundreds of claims remain unresolved.

Climate change will likely create areas of uninsurable assets in many locations, or even regions around the world. Indeed, some part of Australia will likely share the same fate as Fort MacMurray from an insurance point of view.

The problem does not stop here

Outdated flood maps, compounded by rising sea levels and more powerful storms will create similar problems for many cities and regions.

Any old hazard map likely did not take into account those events. Thus those maps are outdated and likely misleading. Indeed they fail to alert home and business owners about their true exposure to hazards as climate change heightens, for example, threats to floodplains.

For instance 2019 saw a record-breaking 12 months of precipitation over the continental U.S: three times, i.e. in April, May and June 2019 the precipitation record hit an all-time high.

Because of these extremes insurance premiums may fail to reflect true risks to properties.  Thus, insurance companies might run of funds or even go under.

Quantitative Risk Assessment

Quantitative Risk Assessment on assets will bring insight that government risk map will fail to provide. They will help insurers as well as their clients to find reasonable solutions. Insurers may be tempted to deny insurance due to these extreme events.

However, insurance denial is not a good solution when your business is to insure assets! Thus, insurers need to find balanced solutions to limit insurance denial amid climate change. Quantitative risk assessment will guide insurers to make risk informed decision.

If you are an owner and need to understand how your risk profile looks like, Quantitative Risk Assessment will shed light on your owned assets exposures. ORE will help you  to make better decisions.

Tagged with: climate change, insurance denial, Quantitative Risk Assessment, risk informed decision

Category: Consequences, Crisis management, Hazard, Probabilities, Risk analysis, Risk management