First it was fierce storms in northern Europe. Since then there have been wildfires in California, a drought in Australia and more storms, this time in the US and Asia. Extreme weather of one sort or another has been a regular feature of 2018. It was the same last year, when hurricanes Harvey, Irma, and Maria as well as wildfires in California inflicted devastation on millions of people. Insurance companies are on the front line as they are exposed to extreme weather and the impact of climate change in a variety of ways, most obviously via direct claims related to volatile weather conditions.
Whether it is paying to replace roofs torn off by high winds, repairing flood damage, or compensating farmers for the impact of drought, insurers have to pay out when the weather is unexpectedly bad. “We have been looking into climate change for 30 years,” says Edi Schmid, the chief underwriting officer at insurer Swiss Re. “Clearly, there are effects — temperatures are rising, and there are more frequent heat waves and droughts.”
According to research from Swiss Re, there were $144bn of insured losses from natural catastrophes and man-made disasters last year, making it the most expensive year so far, although Mr Schmid points out that not all of the costs can be directly connected to climate change. Claims in future years could well be higher if insurance cover spreads. Total economic losses globally from last year’s disasters were $337bn, meaning that more than half of the damage was not covered by insurance.