Extreme weather is a reality – the insurance industry must adapt

Trevor Maynard in the Finance hub at Guardian Sustainable Business: The atmosphere is heating up and becoming more humid, we can say this with great certainty. This is likely to lead to an increase in extreme weather and more flooding. Recent major catastrophes are entirely consistent with this. Climate change might not cause such events – but it can make them much worse.

Since 1980, the cost of natural catastrophes has grown by $870bn in real terms and 2011 was the second costliest year on record for natural catastrophes including devastating floods in Thailand and Australia. Sea levels are rising, most probably at an accelerating rate, and this surely made the impact of Superstorm Sandy worse than it might otherwise have been.

Despite the backdrop of financial crises the long-term impacts to society are potentially too dangerous to ignore. It is critical that economies begin to confront and adapt to the changes that are already underway, while agreeing to internationally binding carbon reduction targets.

Yet the responsibility does not lie with governments alone. Unless businesses take a leading role in adjusting to our new future and adapting to the effects of further climate change then the costs, both financial and otherwise, will continue to grow.

From my own vantage point within the insurance industry, I can see three ways in which we can achieve this.

All industries need to take significant steps towards managing the climate impacts of the companies we run and the work we carry out. In some industries, including our own, progress is being made and programmes are in place to help reduce the environmental impact. ClimateWise, a partnership of insurers, brokers and risk modellers, includes more than 40 insurance companies and organisations globally that are working together to reduce the risks of climate change.

...One of the key challenges for ClimateWise is overcoming the inherent short-termism of business decision-making; embedding sustainable practices at the heart of business necessitates goal-orientation on much longer terms and this can be very difficult within the existing decision frameworks of many businesses….

A flooded street in Bombay during the 2005 monsoon, shot by Hitesh Ashar, Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license