In Short : “The Gathering Storm: Climate Change Impact on Insurers and Policyholders”
In Detail : This phrase highlights the increasing challenges insurers and their customers face due to climate change. The evolving climate patterns pose significant risks, prompting a closer examination of how the insurance industry and policyholders are navigating this turbulent landscape.
In Detail : It’s fair to say that the new year of 2024 in the UK was a washout, with widespread flooding wreaking havoc in communities and on farmland.
Few would have missed the blanket media coverage of inundated homes.
Indeed, climate change is no longer a future event. It is happening now and its impacts are obvious. For example, English river levels reached historic highs this winter.
The River Trent in Derbyshire is a case in point. In the village of Drakelow, the river’s 50-year level has risen from around 3.46 metres in 1959 to 3.83 metres in 2024.
Scientists warn that floods are becoming more frequent and severe. As well as more devastating winter rainfall, summer heatwaves are also becoming hotter.
In 2022, the UK recorded its first ever 40C heatwave. The London Fire Brigade reported its busiest period since World War Two.
A heatwave in September 2023 also smashed records. 3 consecutive days above 20C broke previous highs by a significant margin.
Like floods, heat also affects housing but in different ways. It can cause a subsidence risk to properties. This is due to soil drying out and shrinking.
An industry on the climate front line
Climate change is a big issue for the insurance industry.
In fact, the sector is very much on the front line, with claims for property damage increasing.
Insurers have an opportunity to build community resilience. They can also help policyholders understand the risks. Thus, it’s important to give people the knowledge to protect themselves and their homes.
The Association of British Insurers says subsidence claims hit £219 million in 2022. With 23,000 claims submitted, this was the highest since 2006.
Also, the 3 named storms in February 2022 resulted in 170,000 damage claims.
Across England alone, some 3.2 million homes are at risk of flooding from surface water. This is the most common cause of flooding.
How RSA Insurance is responding to a changing climate
Addressing climate change is going to take a global effort. Government policies, new technologies and citizen action can all make a difference. But it’s imperative that insurance businesses do their bit too.
At RSA, we’re aiming for net zero emissions by 2050 across our value chain. But we also want to achieve a 50% reduction in operations emissions by 2030.
Our climate strategy has 5 key pillars. These help us to reduce emissions and support communities to adapt to climate change.
Steps we’re taking to reduce our operations emissions include electrifying our vehicles. We’re increasing renewable energy at our offices and have reduced corporate travel.
We are seeking opportunities to promote more sustainable behaviours. This involves tailoring our products and pricing, as well as raising awareness about climate change among our customers.
Another emerging area of work is our climate modelling centre of excellence. We’re looking at ways to enhance predictive models to map evolving climate impacts.
This is a crucial endeavour as it helps us to better understand the potential impacts of climate change. In turn, we provide customers with coverage fit for their changing needs. And we can be ready to respond when extreme events do occur.
We’re also working with partners to introduce natural flood management interventions. These are changes that help slow the flow and store water in the environment to reduce flood risk.
What will climate change bring in 2024?
Scientists have confirmed that, globally, 2023 was the hottest year on record. Every day of the year was 1C hotter than pre-industrial times.
Almost half of the days in 2023 were at least 1.5C warmer, and 2 days were more than 2C hotter.
The UK’s Met Office fears that 2024 could be hotter still. The El Niño weather phenomenon is helping to make the world warmer.
That means that the December 2023 floods could become a more frequent event. It won’t come as a surprise if new temperature records are set this summer.
With this in mind, it’s vital that insurers prepare for impacts. We also need to help customers understand how to protect themselves and their homes, for example by signing up for flood warnings and having a solid flood plan in place.