Eyes wide open

Element - - Business - By Adam Gif­ford

The in­sur­ance in­dus­try is streets ahead of the pack when it comes to pre­par­ing for the ef­fects of cli­mate change. They have to be…

At a build­ing re­search cen­tre in Aus­tralia, re­searchers are fir­ing blocks of ice at roof­ing tiles and cars. They want to find out which are more sus­cep­ti­ble to da­m­age by hail­stones.

It’s part of the in­sur­ance in­dus­try’s ef­forts to un­der­stand the risks it faces from cli­mate change.

“We can’t avoid hail­storms, but we can mit­i­gate their ef­fects,” says Bryce Davis, the head of com­mer­cial ser­vices at IAG.

The re­sults of the hail­stone study are be­ing shared with the build­ing in­dus­try so more suit­able build­ing ma­te­ri­als are pro­duced.

If any ex­ec­u­tives in the in­sur­ance in­dus­try still wish to deny cli­mate change, many more are only too happy to shift some of their risk from ex­treme weather events on to them.

“In in­sur­ance, we make sure we un­der­stand risk as best we can with the sci­ence avail­able. It has to be based on fact. It does not mat­ter whether or not you be­lieve there is a man-made fac­tor, cli­mate change is hap­pen­ing so we re­spond,” Davis says.

“One of the im­por­tant roles in­sur­ance plays in the econ­omy is it not only gives peo­ple the con­fi­dence to in­vest, we send out sig­nals on risk, where they may emerge and be­come prob­lem­atic, where peo­ple need to avoid them.

“We have to talk about where th­ese risks are so peo­ple can make good de­ci­sions. If that means not devel­op­ing cer­tain ar­eas, we need to do that.”

In­sur­ers here and over­seas are find­ing not just that there are more ex­treme weather events than in the past, but the da­m­age they do is greater.

Some of that is be­cause of low-ly­ing coastal land and river plains has been de­vel­oped, or users up­stream have been al­lowed to change wa­ter pat­terns. Davis says Scot­land man­ages such is­sues with “flags” or flood li­ai­son and ad­vi­sory groups which in­clude local stake­hold­ers. “That has en­sured there is no fur­ther de­vel­op­ment of flood plains in Scot­land. The re­sult is in­sur­ance is a lot more af­ford­able in Scot­land than in Eng­land.”

He says in New Zealand, one in four dwellings in 2040 will have to be built over the next 30 years. “Are we build­ing in the right place?” IAG has de­vel­oped a part­ner­ship with local govern­ment plan­ners in New Zealand to de­ter­mine the most ap­pro­pri­ate flood plan­ning lev­els for the fu­ture, which will feed in to con­sent con­di­tions and flood mit­i­ga­tion pro­grammes such as the height of levee banks.

Ac­cord­ing to the In­dus­try Coun­cil’s lat­est re­port, seven of the top 10 in­sur­ance loss events world­wide last year were floods or se­vere weather events, to­talling an es­ti­mated US$36 bil­lion in losses.

The other three were the Christchurch and Ja­panese earth­quakes.

In New Zealand, floods in Nel­son, Hawkes Bay, Bay of Plenty and North­land cost the in­dus­try $50 mil­lion, and tor­na­does in Auck­land and Taranaki cost it $7.6 mil­lion.

That’s small beans com­pared with Canada, where in­sur­ers paid out C$1.7 bil­lion last year for ex­treme weather events, and $1 bil­lion for each of the two pre­vi­ous years.

Much of Canada lies in the Arc­tic, where ev­i­dence of global warm­ing shows up first – mon­i­tor­ing sta­tions this spring are de­tect­ing more than 400 parts per mil­lion of car­bon diox­ide in the at­mos­phere – the first time in more than 800,000 years the earth has seen such lev­els.

In New Zealand and Aus­tralia, cli­mate change is ex­pected to mean more fre­quent heat­waves, droughts, fires, floods but also more fre­quent storms and coastal flood­ing.

“In in­sur­ance, we make sure we un­der­stand risk as best we can

with the sci­ence avail­able”

The Welling­ton sub­urb of John­sonville af­ter a hail­storm late last year.

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