The impact of climate change on insurance against catastrophes Tony Coleman.

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Includes bibliographical references.

Weather and climate are ?core business? for the insurance industry. At its most basic, insurers underwrite weather-related catastrophes by calculating, pricing and spreading the risk and then meeting claims when they arise. A changing, less predictable climate has the potential to reduce our capacity to calculate, price and spread this weather-related risk. Insurance Australia Group (IAG) believes that human-induced climate change is now a reality and that it must be addressed with appropriate urgency. We base this assessment on a combination of the science of climate change presented by the Intergovernmental Panel on Climate Change (IPCC) and associated modelling, work done by the re-insurance sector (Swiss re and Munich Re), and on our own modelling, research and claims experience. Figure 1 shows the global average surface temperatures record for the period 1861-2000. Temperatures rose by 0.6 ðC over the last century with the 1990?s the warmest decade and 1998 the warmest year since instrumental records began in 1861 (IPCC, 2001). There is now enough momentum in the climate system, born from past energy and land use practices, to inflict further warming (IPCC, 2001, p17). Although the implementation of global mitigation strategies could significantly reduce the amount of warming, some changes to our future climate are inevitable. This scenario, according to the IPCC, will lead to more intense and/or more frequent extreme climate and weather events. For this reason, the insurance industry has a strong interest in the issue of climate change. The role of insurance in underwriting weather-related risk is an important component of the national economy. Any reduction in the industry?s ability to underwrite weather-related risk will have serious ramifications for the economies of those vulnerable regions where climate and weather risk is greatest.