Insurers Warn of $1.7-Trillion Severe Weather Coverage Gap Over 10 Years
With insurance only picking up 30% of the cost of climate-related weather events over the last decade, the public sector and civil society have been left to pick up a $1.7-trillion tab, according to new analysis by ClimateWise, a collection of 28 leading insurance firms based at the Cambridge Institute for Sustainability Leadership.
“The number of natural catastrophes has increased six-fold since 1950, multiplying financial damages incurred 500%, up to $170 billion,” Corporate Knights reports. The insurance gap on those losses has risen to $100 billion per year, and the prospect of more frequent, expensive weather disasters “has forced insurance companies to raise rates across the board, leaving many areas of the globe effectively uninsurable. Cities in developing countries have been hit particularly hard.”
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That reality produces a two-part challenge, CK notes: society as a whole ends up “less prepared to handle the shocks of climate change,” while insurers are at risk of losing market share. In response, “ClimateWise is encouraging its member insurers to help society become more physically resilient to the risks, benchmarking each member’s progress against their peers with an independent review.”
“Industry leaders now have the opportunity to step up to the challenge outlined by the Paris climate agreement,” Program Manager Tom Herbstein said in 2016. “In particular, the industry must help shift capital flows into climate-resilient assets and resilience-enhancing investments, rather than simply struggling to maintain its current underwriting exposure.”