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Insurers sound alarm on climate change as weather becomes more extreme

By: Jessica Mach on January 22, 2018

The string of natural disasters across the Caribbean, the U.S., and Mexico in the past six months is pushing more people to talk about climate change and how it impacts our livelihood. As extreme weather becomes more frequent, one such conversation has been happening between insurers, who are trying to adjust to the new risks.

The Canadian Institute of Actuaries (CIA) reported last week that the seasonal Actuaries Climate Index value in the spring of 2017 was 1.66. It’s the seventh consecutive season where the value was higher than 1.50.

What does this mean? The Actuaries Climate Index measures temperatures, winds, precipitation, drought and sea levels. The higher the index value is, the more extreme all of these are.

Between 1961 and 1991, the index value has never been higher than 1.0. Any number higher than 1.5 is definitely cause for concern, and the index has been above that mark for nearly two years.

“Extreme weather events have multiplied beyond what one would expect based on the benchmark climate parameters,” said Caterina Lindman, chair of the Climate Change Committee, in a release from the CIA in October.

The CIA represents actuaries across Canada. The organization regularly compiles data on extreme weather and sea level changes, and provides that data to inform actuaries, public policymakers, and the public.

The news that extreme weather is becoming the new normal should not only be alarming to those in the insurance biz. Insurance buyers and homeowners should also be wary.

One of the biggest considerations for insurers when they are trying to figure out how much to price a premium, is what the risks are for the customer they are working with.

If extreme weather conditions continue to persist in places that have historically been mild, the likelihood of premiums going up is also high. Add that to the (big) list of reasons why climate change should concern you.

 

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