Risk Management

Managing Risks of Climate Change

Insurers See Growing Risks from Climate Change

In 2011 there were 14 natural disasters in the U.S.A, the most ever known.

In the United States, when it comes to discussion on climate change, the public mainly take the conservative line and believe it is all a conspiracy theory dreamt up by Scientists seeking more money for grants or from Greens or liberals from the left of the political divide.

In Australia we see the Liberal & National Parties (Conservative), disputing the existence of climate change an vehemently opposing and action taken by the Federal Government and the Greens to implement measures to start reducing the impact of carbon emissions.

However USA's insurance companies are now warning that these costs to taxpayers and businesses will continue to soar because of climate change. .After a year of over $1 billion record breaking natural disasters, can you really blame them?

The insurers at a press conference recently discussed the mounting financial impact of global warming. Both Vermont and Rhode Island last August felt the brunt of Tropical Storm Irene, one of the record 14 natural disasters in the United States last year that each caused more than $44 billion in damage.

Irene alone, which first came ashore as a hurricane, killed at least 45 people and caused more than $7 billion in damage.

It may be true that no industry better understands the impact of global warming than the insurance industry whose job it is to analyze risk, and their leaders are speaking out about the need to reverse global warming. Extreme weather events, like Rhode Island’s historic floods in 2010, can result in the loss of homes, livelihoods, and even lives.  These extreme events fit a pattern predicted by climate scientists, and action is being demanded by insurers and some Senators in Congress. to minimise the damage that carbon pollution is causing to their country and more importantly he rest of the world.

Property and casualty insurers in the United States experienced an extraordinary $44 billion in losses last year when hurricanes, droughts, tornadoes and other natural disasters were more severe, longer, more frequent and less predictable than in the past.

The Reinsurance Association of America  stated that from the insurance industry’s perspective, the footprints of climate change are all around and the trend of increasing damage to property and threat to lives is clear,.

According to Swiss Reinsurance Company Ltd., the average weather-related insurance industry loss in the U.S. was about $3 billion a year in the 1980s compared to approximately $20 billion annually by the end of the past decade. They say that a warming climate will only add to this trend of increasing losses, which is why action is needed now. Extreme weather is a threat today and a greater threat tomorrow, said a chief risk officer at an International Reinsurance Brokerage.

One Insurer stated that the climate is changing, human activity is helping to drive the change, and the costs of these extreme weather events are going to keep ballooning unless we break through our political paralysis, and bring down emissions that are warming our planet. Insurers is the USA believe that if we continue on this path, extreme weather is certain to cause more homes and businesses to be uninsurable in the private insurance market, leaving the costs to taxpayers or individuals.

Read what Willis CEO, Joe Plumeri said about Climate Change

However, the political will in the USA is weak. Certainly the Conservative Republicans, and some Democrat politicians are sceptical about the relationship between climate change and increasing natural disasters. Even here in Australia, the Conservative Coalition opposition, are in denial of the need to be part of reducing Carbon emissions, the leading cause of climate change. They sacked a leader who believed in it. While in a bid to capture the centre ground of the political debate, they are promoting providing financial incentives to encourage business to reduce their emissions, it is likely they will have to either have to keep increasing the incentives to get results or more likely scrap the whole plan due to the excuse to reign in government debt.

The current Federal Government is bringing in a mandated price on carbon from the 1 July 2012 with the aim to move to an Emissions Trading system within a few years after. The Conservative opposition is committed to scrapping it “with their last political breath”. The Conservatives continue to lead substantially in the opinion polls against a very un-popular Prime Minister, despite the leadership shown on the issue.

As Insurance premiums become more and more expensive to pay for claims from these disasters, the scenario is more and more people will become un-insured or under-insured. Governments are required to look after and protect their citizens, a demand by on democratically elected governments, putting more pressure on individual tax payers and pushing governments further into debt as they rebuild after disasters. Alternatively insurers will find certain disasters un-insurable and start excluding them. We have seen this with Sea and Storm Surges as well as land subsidence. There is currently a huge debate over the issue of flood insurance which also has a man-made influence deeming it often un-insurable.

Australia is the biggest polluter per capita in the world while the USA is responsible for 35% of the world’s carbon emissions. Their biggest competitors on the world stage are China and India and one gets the feeling that they will also act on carbon emissions if other countries like Europe, USA and Australia lead the way. So while the argument that Australia is only responsible for about 1% of Carbon emissions, the fact is we must be seen to be doing something. It is also a great opportunity to lead the way with more innovative technology in this area through alternate and remedial energy sources. We have some of the best Scientists in the world and it is amazing the technology they are developing. The greatest incentive for any businesses to invest in innovation is when they are in competition or seeking to reduce their bollow line expenses. Which is why a price on Carbon is believed to be the most effective method in a free enterprise market economy.

One thing for sure is that Insurance policy holders will find premiums increasing substantially with the ever increasing natural disasters occurring around the world. Whether it is part of a natural cycle or not, we must give Climate Change the benefit of the doubt because the financial consequences otherwise will be much worse.

 I for one believe in Risk Management, and reducing the chance of potential foreseeable losses fits well into good management of risk programme. It is just that in this case, it is needed on a global scale.

  For further reading on this issue:

Emissions growing and Temperatures Soaring

Climate Science has shown its worth

Climate Change feeds Hurricane Sandy

Study finds Earth is Hotter and Global Warming is at work

Liberty White Paper - Emerging Risks of Climate Change

Liability White Paper - Emerging Risks of Climate Change Part 2

Rising Sea Levels cannot be stopped but can be slowed

Is the Carbon Tax a form of Insurance?

Climate Change hits globes water supply

Geneva Association - Climate Risk & Insurance Committee

Asia needs $40 Billion annually to deal with climate change

CO2 at 800,000 year high

Plan now for Climate Related Disasters

Drier Conditions expected as La Nina recedes

Warm March in USA raises climate change concern

More evidence of Climate Change is revealed

Rapid Changes in Artic create new risk issues

NSW faces catastrophic future

Sea Levels rising faster along Atlantic Coast

Insurers need commercial imperative to adapt to climate change

Ex-Skeptic now agrees Man causes Climate Change

California prepares for harsh reality of Climate Change

Alaskan Villages Hit hard by climate change

How to Parse Climate Change and Extreme Weather

Jury still out with some insurers on climate change




Latest News

High Court dismisses Business Interruption Test Case

Today the High Court dismissed appeal by Insurers on the Business Interruption test case. Even the big insurers make silly mistakes! But you the policy holder may benefit if you were one of the 40% of Business Pack policy holders that added Business Interruption cover to their Business Pack. While it was never the intent of insurers to cover policyholders for the loss of income from a pandemic, the fact that insurers never factored in a risk premium for it, and the fact there is supposed to be a material or physical loss to trigger the Business Interruption section, none of that matters according to the highest Court in the land. So what was the mistake? Simply that when insurers defined what they considered to be the definition of an infectious disease, they referred to the Quarantine Act of 1908 which since was superseded by the Biodiversity Act of 2015. Because the Quarantine Act of 1908 no longer exists, apparently you cannot draw on this for a definition of an infectious disease? Not one of the insurers picked up on this! Shows how much interest we take on the business of Governments, except what is reported in the media.

read more

Three Years running - Insurance Brokerage of the Year 1 to 5 staff

Mandy and Robert Cooper were extremely honoured and astounded to once again win, Insurance Brokerage of the Year for 2020 from Insurance Business Australia magazine. This is the third year running.

While this year has not been the easiest of years for the business with Covid 19, the Recession, the hard market and issues at Lloyds of London, we are literally all in this together as an Insurance Industry.

CPR Insurance Services continues to make our clients the number one focus of our business while managing our relationships with Insurers, who we need more than ever in this market climate.

CPR Insurance Services are a highly ethical Brokerage with a reputation as a trusted advisor who always acts in the Client's best interests. Their experience, knowledge and expertise is amongst the highest in the industry.

CPR Insurance Services is now ten years old as a business and is proud of being an Authorised Representative of Ausure and their partnership with Steadfast, giving CPR the strength and backing to match it with any Broking firm in the Insurance Industry, but remain focussed on supporting the Small to Medium business segment.

Memberships of the National Insurance Brokers Association, Australia and New Zealand Institute of Insurance and Finance, Australian Insurance Law Association, Australian Professional Indemnity Group and the Australian Institute of Company Directors, ensures CPR Insurance Services maintains the high standard of knowledge and expertise required to be one of the best Brokerages in Australia.

CPR Insurance Services also plays a strong role in their local community supporting other Sporting Clubs and Community organisations. They also support and promote local businesses with their operation of the Kedron Brook Business Group who meet regularly and has 174 members.

We are truly honoured to receive this National award once again for the third year as a recognition of CPR Insurance Services contribution.

read more