LONDON (Reuters) - Leading insurers, hit by rising claims from “extreme” weather, signed up on Thursday to a list of green principles that they say will push the industry to help mitigate and better manage the risks of climate change.
The industry is among those at the forefront of climate change research as around one-third of all overall claims are from weather-related natural disasters.
Insurers faced a bill of over $83 billion (41 billion pounds) for damages from U.S. hurricanes in 2005 and this year claims are again rising fast, after the Kyrill storm in January, heavy UK floods this summer and, so far, two ‘category 5’ hurricanes.
Thursday's pledges -- signed up to by giants from AIG AIG.N to Zurich ZURN.VX, and led by the UK trade body -- include the commitment to carry out more research on climate change, to develop improved risk analysis, to engage in public campaigns and the commitment to make customers greener by selling policies like "pay-as-you-drive" insurance, which encourages people to leave their cars at home.
The insurers also agreed to incorporate climate change into investment strategies and to make their businesses greener.
“The industry has been doing a lot,” Stephen Haddrill, director general of the Association of British Insurers, said.
“What we are trying to do here is raise the game.”
The ABI says it hopes to set a standard of “best practice” that insurers beyond the initial founding partners will follow.
Without this, it said, premiums could rise across the board, for life, property and health insurers, and some customers, in flood prone areas for example, could find themselves “uninsurable”, as a result of poor risk management.
UK insurers are already not obliged to cover homes with more than a 1 in 75 chance of flooding, though currently they do.
Thursday’s principles were welcomed by environmental campaigners, though they will likely revive the debate over whether the industry, set to suffer one of the most direct impacts from climate change, is really doing enough.
To coincide with Thursday’s principles, fund manager F&C published research showing that despite activism in some quarters, others in the industry have been too slow to act and still underprice risk, falling back on traditional models which are no longer a reliable guide.
“If business leaders in the insurance industry grab hold of these principles and begin to really drive the government to introduce measures for a low-carbon economy, the agreement of these principles will be seen as a landmark,” Mike Childs, head of campaigns at Friends of the Earth, said.
“If it continues as a softly-softly approach, with the occasional eye-watering statement on the costs of weather impact, we are not going to see the changes in government policy that are necessary to protect the industry in the long-term.”
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