Study says insurance industry dangerously unprepared for extreme weather

May 15, 2018, University of Waterloo

As historic flooding caused by climate change devastates communities in New Brunswick and British Columbia, new research from the University of Waterloo reveals the insurance industry hasn't considered a changing climate in their practices, putting homeowners at financial risk.

The study which looked at data from 178 insurers, found that most insurance companies assumed the risk to property from is static and based their premiums on historical data. However, as extreme weather events are increasing in severity, frequency, and unpredictability, insurers have not adjusted.

"As extreme events become more frequent, insurers that ignore will not put away enough money to cover their claims. To re-coup those losses, they'll have to raise rates or pull coverage from high risk areas," said Jason Thistlethwaite, a climate change economist at the University of Waterloo. "When this shift happens, thousands of people will lose coverage or it will be unaffordable."

Another finding in the report outlined how reinsurers, insurers for insurance companies, have been better at reacting and adapting to climate change-related . This dynamic could lead to significant disruption in global industry.

"Some insurers are better at understanding climate change than others. These organizations will survive, and likely be able to sell climate services to their counterparts struggling to understand the problem," said Thistlethwaite. "Those that don't, will fail. Insurers are supposed to watch our backs by looking into the future and protect us from unexpected events. We pay to not worry about these things."

A full version of the study, Insurance and Climate Change Risk Management: Rescaling to Look Beyond the Horizon, was published in the British Journal of Management.

Explore further: Natural disasters in 2017 cost record $144 bn: Swiss Re

Related Stories

Climate change altering insurers' risk assessment

June 24, 2013

Climate change is creating more frequent and more unpredictable extreme weather events, forcing insurers to change how they assess the risk of natural disasters hitting a specific area, the Geneva Association think tank said ...

Recommended for you

Tiny 'water bears' can teach us about survival

March 20, 2019

Earth's ultimate survivors can weather extreme heat, cold, radiation and even the vacuum of space. Now the U.S. military hopes these tiny critters called tardigrades can teach us about true toughness.

A decade on, smartphone-like software finally heads to space

March 20, 2019

Once a traditional satellite is launched into space, its physical hardware and computer software stay mostly immutable for the rest of its existence as it orbits the Earth, even as the technology it serves on the ground continues ...

Researchers find hidden proteins in bacteria

March 20, 2019

Scientists at the University of Illinois at Chicago have developed a way to identify the beginning of every gene—known as a translation start site or a start codon—in bacterial cell DNA with a single experiment and, through ...

Turn off a light, save a life, says new study

March 20, 2019

We all know that turning off lights and buying energy-efficient appliances affects our financial bottom line. Now, according to a new study by University of Wisconsin-Madison researchers, we know that saving energy also saves ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.