CLIMATE CHANGE & INSURANCE
CLIMATE CHANGE & INSURANCE
Climate change is no longer a matter for academic discourse. In recent years it has become a matter of survival for the human race. Papers on how to curb the effects of climate change have been shared in a number of powerful economic groups including the European Union, African Union, G7 and G20 countries.
Stronger and more frequent natural disasters are destroying homes and businesses at record-breaking rates and putting entire livelihoods at risk. For example the recent Haiti earthquake and Tropical Storm Grace 2021, Australia wild fires 2020 ,Cyclone Amphan in Bangladesh and India and Morocco Forest fire August 2021 all these disasters claimed a number of lives and destroyed vast properties and crops
According to the World Economic Forum the insured losses from natural disasters reached $42 billion in the first six months of 2021. Natural disasters affect both developed and developing countries, the rich and poor and all sectors of the economy. Below is an overview of how natural disasters impact different economic sectors:
Agriculture-Cold snaps, heat waves, floods, hail and wild fires have potential of destroying crops and livestock. With the increased frequency and magnitude of natural disasters there is need for one to have a plan to mitigate losses that may arise as a result of natural disasters.
Construction –Construction projects face various weather risks such as hurricanes, thunderstorm, and extreme rains. Significant delays may result leading to severe financial losses even if the building itself does not sustain physical damage.
Tourism– The tourism industry is particularly sensitive to weather variables. Extreme weather may destroy infrastructure and subsequently limit the number of tourists visiting the attractions. Air, Sea or Road travel can be restricted for certain periods of times.
Energy-With significant shift of energy production to wind, solar and hydro, the weather risk becomes a critical factor. Renewable energy output can be substantially affected by immediate events such as hurricanes, hail, floods and or degradation of wind patterns resulting in prolonged insufficient wind or solar resources.
One of the key tasks and core competencies of the insurance sector is to assess natural risks on a continuous basis and to manage the potential impacts of those risks to economies and livelihoods. There are number of insurance products and instruments that one can consider to hedge against losses arising from extreme weather conditions. Please get in touch with us for a detailed presentation relating to your area of concern.