Sustainability has recently emerged as a strategic imperative for every business. It not only enhances resilience and adds value but, more crucially, shields you from looming threats like climate risk. In our ongoing series, 💡📈’Climate & Business: Industry Impact Series,’💡📈 we delve deep into the transformative effects of Climate Change across various sectors. Today, we plunge into how climate risk is reshaping the landscape of the Insurance Industry affecting both the industry itself and its customers in the United States.
🌱 Policy Changes: Several large U.S. property insurersvhave decided to stop providing coverage in regions vulnerable to extreme weather events due to climate change.
🚫 Coverage Exclusions: Insurance companies are excluding protection against certain natural disasters, such as hurricanes, wind, and hail, in policies for properties along coastlines and in wildfire-prone areas.
🏡 Vulnerability Expands: Homeowners in areas once considered safe from natural disasters may lose crucial insurance protections as their exposure to these disasters increases or intensifies with rising global temperatures.
💸 Cost Escalation: Recent extreme weather events, such as Hurricane Idalia, Tropical Storm Hilary, and wildfires in Hawaii, have led to escalating insurance claims costs, setting records for payouts.
🌎 Risk Concentration: Insurers are concerned about concentrating risk in certain geographic areas, which is becoming too costly, leading to re-examining their concentration risk.
🌦️ Changing Weather Patterns: Insurance companies are struggling to rely on previous risk projections due to changing weather patterns caused by climate change, such as year-round wildfires and more intense hurricanes.
👥 Impact on Consumers: These policy changes may be unfavorable to some consumers, as they will need to purchase supplemental policies or seek insurance from other providers to obtain coverage for specific disaster-related damages.
🏢 State Interventions: State governments have had to step in with policies of last resort, like Citizens Property Insurance in Florida, as private insurers pull out from certain markets due to the high costs of insuring against climate-related risks.
Climate change is not merely a distant specter; it’s already transforming every industry and will have a profound global economic impact. Have you taken the time to assess the unique risks and opportunities your industry faces in this changing climate?
Facultas-Risques Services Conseils Inc. stands ready to assist you with your industry-specific risk assessment and mitigation strategies.
Today’s insights are sourced from: Bogage, J. (2023, September 3). Home insurers cut natural disasters from policies as climate risks grow. The Washington Post.
