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How will climate change affect the insurance industry?

Climate change is a hot topic in the insurance industry at the moment, especially when thinking about the risks it brings to both businesses and private individuals. As the threat of climate change looms, we look at what that might mean for the future of the insurance industry.

    What are the risks associated with Climate Change?

    Climate change poses specific risks that need to be considered by both businesses and insurers in the UK.

    Floods and Coastal Erosion

    Many properties are at increasing risk of damages from rising water levels and coastal erosion. Flood risks arise as a result of

    • A river or canal bursting its banks
    • Flooding from seawater caused by storms and high tides
    • Surface water and rapid ground water flooding after heavy rain
    • Flooding from burst pipes unable to cope with heavy rainfall

    As climate change progresses, it’s likely that we will see much more flood damage to properties in the UK, especially those in higher risk areas. In coastal areas, the risk of erosion will continue to worsen affecting more properties both commercially and privately.

    Long Term Health Factors

    Climate chance could also affect our personal health insurance in the future. Longer term health conditions and morbidity rates are likely to be exacerbated by heat waves, droughts, and fires.

    According to Deloitte’s report, secondary factors affecting life insurance could also include climate change-related developments like migration, access to clean water, and increasing the geographical transmission range for many infectious diseases.

    How will the insurance industry respond to climate change?

    As the risk from climate change worsens, it’s likely that many insurers will increase premiums or make it harder to obtain insurance in high-risk areas. We may also see the introduction of specific products created to insure against the effects of climate change in the UK.

    What can you do?

    Although climate change might feel like a far-off risk for future generations to worry about, the time to prepare is now.

    The best way to start is by performing a risk assessment to determine the ways climate change will affect your business. For example, are you in an area that will become a risk of flooding? Does your business depend upon the supply of materials from countries that will be greatly affected by climate change? If so, what impact will this have on your business?

    Once you have an idea of the types of risk posed to your business by climate change you can take steps to manage and minimise these as much as possible. Not only will this help to protect you, it will also make you a more appealing customer to insurance providers.

    For any help or advice on assessing risk within your business ask our insurance experts. Call us on 01926 495113.

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