Climate change puts Gulf Coast on hook for $21.5b annual bill
Swiss Re’s latest sigma report into global catastrophe losses has found that climate change will lead to changes in the frequency, intensity and duration of extreme weather events.
Sigma estimates that the cost of climate change for the US Gulf Coast may rise to $21.5 billion a year by 2030.
Risk mitigation measures may help to drive down the impact of climate change, but it is apparent that it is changing the risk paradigm.
Natural disasters accounted for $37 billion of the $45 billion of insured losses suffered in 2013, with flood and hail events proving particularly costly in 2013.
26,000 lives were lost during the year, with Typhoon Haiyan in the Philippines the most significant natural disaster. Europe was also badly hit by flooding and hailstorms and Canada by flooding.
Of particular concern is the fact that the global protection gap continues to widen, according to Swiss Re. While risk mitigation efforts have been successful in certain geographies in driving down the level of economic loss, many regions are exhibiting a growing disparity between economic and insured loss.
As Kurt Karl, chief economist at Swiss Re explains: "The total economic loss of Cyclone Phailin is estimated to be $4.5 billion, with just a tiny portion covered by insurance. The insurance industry can play a much larger role in helping societies deal with the fallout of disaster events, such as this and Typhoon Haiyan."
The gap in the provision of insurance coverage has steadily widened over the past 40 years and it is apparent that the insurance industry needs to do more to strengthen take-up internationally.
The report found that climate change is likely to make the case for greater insurance buying all the more pressing. As sigma reports “Rising temperatures are expected to lead to more frequent and severe extreme weather events in the future. If no action to reduce greenhouse gas emissions is taken, these events are likely to become an increasingly important factor in the ongoing upward trend of total losses.”