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895d3cc8 facf 49fd a070 27dcff92fd00 (1) .pdf

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Climate change is one of those items you might see featured in the news on an almost continual
basis, yet it never seems to noticeably affect you. This is about to change though, because scientists
have warned that planet earth is already halfway towards the dangerous threshold for climate
change. It seems inevitable that some direct and noticeable effects of this phenomenon will soon hit
the economy, and one of the industries in which it will most likely have the most profound influence
is the insurance industry. Insurers are actually quite well prepared for its effects, due to the work of
actuaries, whose role it is to analyse risk and keep up to date with emerging trends in the insurance
sector. Knowing what effects climate change will have on insurance and thus on your business will
help you make better-informed decisions to manage and mitigate risk.
•Increased Premiums: Due to the positive correlation between climate change and severe
weather events, business insurance premiums are very likely to rise. You should factor this
into your yearly budget, possibly by estimating your commercial insurance premium costs
more conservatively. With an increased likelihood of severe weather events, comes a
higher likelihood of insurers having to pay out on claims for products such as business
interruption cover and storm damage insurance. Actuaries will factor this into their pricing
and consequently there will be a marked upswing in premium costs.
•New Insurance Products: Insurers will likely see climate change as an opportunity to
introduce innovative new products into the market. A possible outcome of this for your
business is that incentives such as discounted premiums may be offered for switching
your company over to renewable energy sources. Investing in renewable energy is an
expensive venture for even the most solid business, so as a further incentive, insurance
companies are likely to offer direct investment to help with the set-up costs of installing
these more environmentally friendly sources of energy. Investment in "green" energy is a
wise choice as it could have the dual effect of benefiting both your business and the
environment. Everyone is a winner!
It is difficult to quantify the exact impact that climate change will have on the insurance industry
and the wider economy within the next few years, but there is no doubting that it will be substantial.
Scientists have already warned about the startling pace at which it is advancing. Informing yourself
about the key effects of climate change on the insurance industry is one of the smartest business
decisions you will make this year.

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