Insurers calculate the rising risks of climate change

Ingi Salgado in Business Report (South Africa) writes a long, fact-filled report about a country that has a history of innovative insurance practices: The risk of rising claims from severe weather events has prompted global insurers to warn that the continued availability of widespread insurance depends on taking immediate action to mitigate climate change and adapt to its effects.

The Association of British Insurers earlier this month said a 2176C [sic] rise in average global temperatures - described as "inevitable" - would raise the UK's average annual insured losses from inland flooding by 8 percent, or £47 million (R588m). Additional insurance capital of £1.65 billion would be required, potentially leading to a drop in the availability of cover and making insurance more expensive and harder to get.

Comparative figures for South Africa are not available. The local insurance industry is only starting to get to grips with the risks and opportunities linked to climate change. "It's still very early days," says Auto & General chief executive Leon Vermaak. "I don't believe there's a concerted effort from the insurance industry. We're aware of the issue but not quite sure what to do."

South Africa's largest short-term insurer, Santam, seems to be leading the pack, having joined ClimateWise, a global initiative to collaborate on climate change that counts the world's top insurers as members. Santam is in the process of gathering data to better understand the impact of climate change on clients and to propose solutions to mitigate these risks, says Hendri Nigrini, the executive head of risk services.

...David Bresch, the head of sustainability and emerging risk management at Swiss Re, says South Africa needs to undertake its own study to identify where the greatest climate risks are located and how big the losses might be. "It will then be in a position to prioritise investment to reduce exposure to climate change and support local economic development," he says, adding that it's better for governments to make early investments in climate adaptation, including insurance, rather than face major budget deficits in managing disaster relief after a severe weather event….

Composite satellite image of South Africa in November 2002. NASA