The Association of British Insurers (ABI) has warned its members to prepare for increasing storm damage to UK properties as global temperatures rise. A new report conducted for the ABI by AIR Worldwide predicts that global temperature increase of just 1.5oC – which some scientists believe could happen as soon as 2026 – will result in an 11 percent increase in insurance losses to high winds. According to the report, Northern Ireland will be the worst affected part of the UK, with storm damage expected to increase by 41 percent. The West Midlands can expect a 37 percent increase, while London, in the Southeast corner of the UK may actually see a fall of 16 percent.
Flood damage will also be a problem, but its impact will be different:
“When looked at over the long term, floods and windstorms tend to result in similar levels of claims costs for the insurance industry, but while floods create lower numbers of expensive claims, wind damage affects far higher numbers of people less severely.”
The additional losses will run to billions of pounds and will inevitably have an impact on premiums. However, the bigger threat will be to insurance companies themselves as they are already under pressure as a result of the low interest rate economic environment that continues in the wake of the 2008 crash. And since the same crash has served to depress wage growth, it is doubtful that insurers will be able to raise premiums too steeply. Matt Cullen, Head of Strategy at the ABI explains that:
“Severe storms result in claims costing billions of pounds. The likelihood of these claims increasing in the future is something the insurance industry, and society, need to start preparing for now. Planners and builders should be aware of the need for more wind-resistant construction in specific areas of the country if claims are to be kept to a minimum and residents spared the distress and expense of higher levels of wind damage.”
One way or another, it looks likely that the costs involved in responding to climate change are going to be a lot higher than they would have been if we had chosen to act when it was still possible to reverse it.