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By 2040, climate risk is expected to increase the annual premiums of property insurance by as much as US$183 billion, as the frequency and severity of extreme weather continue to increase, prompting insurance companies to increase prices.
The Swiss Re Institute, the research arm of the Reinsurance Group, predicted on Monday that climate-related risks will account for a little more than one-fifth of the overall increase in real estate premiums over the next two decades.
Factors classified as “economic development”, including inflation and growth in insurance assets, are expected to account for three-quarters of the growth, contributing as much as $616 billion to the Institute’s expected $1.3 trillion market Premium.
Wildfires, winter storms and floods This caused the industry to pay a price in 2021. The industry’s natural catastrophe insurance started this year the worst in ten years-and that was before July floods in Europe And the damage caused Hurricane Ida In the United States in recent weeks.
Jerome Haegeli, chief economist at Swiss Re, believes that climate change is the “number one” risk to the global economy.
He said that the insurance industry has the ability and expertise to deal with risks, but emphasizes that the prediction of losses and claims assumes that the world has achieved the goal of maintaining global temperature rise at 1.5 degrees Celsius higher than the pre-industrial level.
“If we are in a more serious situation, then you will talk about higher economic losses, and then the question is obviously what the price tag is [put on that by insurers]”He added. “Can you still afford it? Is the insurance industry still willing to do it?” “
Swiss Re said that in some important markets, including China, the United Kingdom, and France, due to climate risks, weather-related property disaster losses may double by 2040.
These forecasts show how the broader property and accidental injury market may change.
Property insurance is expected to rise from 25% of total property and accidental injury premiums in 2020 to 29% in 2040. At the same time, auto insurance is expected to fall from 42% to 32% during this period, as Swiss Re stated that this is the result of “safety improvements brought about by automation and smart technology”.
Policy makers are increasingly concerned about how insurance companies will respond to climate change.Last month, the Federal Insurance Office of the U.S. Treasury Department Publish Request information on climate-related risks in the sector. “There is increasing evidence that climate change may be related to the decline in the availability and affordability of insurance provided by the private sector… in certain markets,” it said.
The FIO stated that it will assess the possibility of climate change causing “significant damage” to certain insurance markets, and will “check the insurability of disasters caused or exacerbated by climate change, including wildfires, hurricanes, floods, wind disasters, and extremes. disaster”. temperature”.