Company boards need to raise their awareness about the risk to balance sheets stemming from climate change, particularly since some aspects of these risks are not covered by conventional insurance.
Of longer term worry is the impact the biodiversity loss and the collapse of ecosystems will have on the globe. Climate change is increasingly impacting ecosystems, with disruptive effects on the social well-being, economic development, supply chains and financial stability in both the short and long term.
In 2022, the United States sustained £1.6 billion ($2bn) in costs due to 20 climate-related extreme weather events. Lumber, cotton, tomatoes, wheat and energy were all affected. These climate events are increasingly blamed for issues that lead to higher costs of living.
Capgemini, the French multinational information technology company, revealed in their World Property & Casualty Insurance Report 2022 that insured natural catastrophe losses have increased by 360% within the past 30 years. Seventy-four percent of the insurers interviewed felt that climate change made it hard to insure some areas. An increase in heat stress resulting from global warming is projected to lead to global productivity losses equivalent to 80 million full-time jobs in the year 2030, according to a report from the International Labour Organization (ILO).
Mark Dutton, director at W Denis, said: “Conventional insurance is not always suitable to deal with climate issues as there has to be physical loss or damage caused by a specified peril, e.g. fire or flood. However, extreme weather conditions can cause non-damage interruption to businesses“. Non-conventional insurance is available from W Denis to guard against extreme conditions of weather, linked to pre-determined temperatures (hot or cold) or excessive rainfall or drought. “Such parametric insurance – a non-traditional insurance product that offers pre-specified pay-outs based upon a trigger event – should be on the agenda for risk managers to routinely review as part of their exposure management.”
W Denis are one of the largest independent insurance brokers in the UK and arrange competitive insurance solutions. To discuss this further with a broker at W Denis, please make arrangements with Daniel Moss at daniel.moss@wdenis.co.uk or on 0044 (0)113 2439812.
