www.abi.org.uk/climatechange

This webpage provides an overview of ABI's work on climate change. It sets out how the insurance industry is addressing the risks and opportunities of climate change, and working with the Government and other stakeholders to ensure that climate risks are effectively managed. The webpage includes key ABI research and policy papers on climate change.

Key messages

• The impacts of climate change will be wide-ranging, and many sectors of society will be affected by climate change in some way.

• Although there will always be some uncertainty in our estimates of climate change, the size of the risks means that society must begin to take sensible steps to prepare.  Unless we are adequately prepared, many of the impacts will be detrimental.

• An increase in the frequency or severity of extreme weather events could mean that insurers have to increase premiums to stay viable.  Thus, the insurance industry needs to work pro-actively with the Government and key stakeholders (e.g., construction industry) to look at its options for reducing risks before the most serious impacts of climate change begin to be felt.  Unnecessary costs and damages could be avoided by ensuring that climate change is factored into plans and decisions at an early stage.

Background

Climate change is already with us.

• Temperatures in central England have already risen by almost 1 °C over the last 100 years. In the summer of 2003 we experienced some of the hottest temperatures on record in the UK.

• In 2000, the country experienced its wettest autumn for almost 300 years, with heavy rainfall leading to 10000 properties being damaged, and over £1 billion in insurance costs.

• In future it is expected that summers will become hotter and drier, while winters will be milder and wetter.

• Climate change scenarios published by Defra in 2002 show that average annual temperatures across the country could increase by between 2 and 3.5 °C by the end of the century.  Two out of every three summers could be as hot as the very hot summer of 1995.

• Summer rainfall could decrease - by up to half in parts of the south-east - while winter rainfall and the frequency of intense downpours may both increase, leading to increases in peak river flows by up to 20 % in parts of the north-west and Scotland.

• Sea levels will continue to rise around the coast of the UK, and present-day extremes of high sea water levels will occur more frequently, increasing the risk of flooding and coastal erosion.

• The number of storms crossing the UK in winter could also increase.

Since 1990, weather-related insurance claims have cost an average of £825 million per year in the UK, and have exceeded £1 billion in four out of the last 15 years.  In the unusually hot summer of 1995, net losses to agriculture were estimated to be £180 million.  This summer, speed restrictions were imposed on some long-distance and commuter train routes due to the risk of buckling rails.  Estimates suggest that this disruption cost the UK economy £3.9 million for each day above 32 °C and £8.7 million for each day above 37 °C.  These costs will continue to escalate unless we take early action to prepare ourselves for the impacts of climate change


ClimateWise:  reducing the risk for tomorrow

The sixteen founding members of ClimateWise, including the ABI, launched this worldwide first on 13 September in London.  The initiative, put together by the ABI, His Royal Highness, The Prince of Wales’ Business and the Environment Programme and Business in the Community, will encourage more climate-friendly and climate-proofing behaviour among individual and business customers, and seeks to influence public policy on tackling climate change.

The six ClimateWise principles are to:

· Lead in risk analysis
· Inform public policy making
· Support climate awareness amongst our customers
· Incorporate climate change into our investment strategies
· Reduce the environmental impact of our business
· Report and be accountable

The ClimateWise initiative was backed by a total of 38 insurance industry partners at its launch.  Although originally a UK-based initiative it is being taken up on a global basis by international groups and is open to all firms in the industry.

Third ABI Climate Change Conference, September 2007

The ABI’s third annual conference on climate change was held on 13 September.  HRH, The Prince of Wales attended the launch of the new insurance industry initiative on climate change, ClimateWise, giving the keynote address. 

Archie Kane, ABI chairman, set out the importance of climate change as a challenge and opportunity facing the industry.  Tom Woolgrove, chairman of the ABI Property Committee set out the key features of the ClimateWise initiative.

There was a panel session where founding CEOs set out how their companies were going to turn the principles into concrete actions to combat climate change and its impacts.

The afternoon session turned its focus to looking at how businesses can deal with the climate change challenge.  Roger Harrabin, environment analyst at the BBC, opened the session with a review of the changing engagement of business in the climate change debate and discussed the importance of business sectors adversely affected by climate change impacts speaking up as well as those concerned over increasing costs due to regulatory measures. 

James Smith, chairman of Shell UK, set out his vision for a 21st century energy company.  Jane Milne head of property and lead on climate change issues at the ABI, reported on new ABI research on customer demand for climate-friendly and climate-proof insurance services, and emerging climate insurance markets.

There was a debating session where the audience was polled on key issues facing the industry in responding to customer needs, such as better risk data and a wider understanding of climate issues within businesses.  These results, along with those from a consumer survey undertaken by YouGov in August 2007, on behalf of the ABI, will be reported shortly.

Insuring our future climate:  thinking for tomorrow, today

The ABI’s latest research on climate change examines the role of the insurance industry in promoting, encouraging and facilitating actions by its customers and suppliers to reduce greenhouse gas emission (climate-friendly behaviour) and manage the risks of inevitable climate change (climate-proofing actions).

It looks at the opportunities for insurers to develop new products and services addressing climate change and assesses the potential size of these markets, together with effective ways to engage customers.

The research found that the premium value for UK commercial renewable energy insurances could reach £450 million to £1.33 billion by 2020, with similar covers for domestic renewables adding to brand competitiveness.  Carbon trading markets have been estimated as potentially reaching £33.5 billion by 2010, in which case a 1% premium rate would generate 3335 million in annual premiums.  It is likely that there will also be wider uptake of existing insurances such as Household and SME covers which, together with reduced underinsurance as customers seek full protection from severe weather, could add as much as 10% growth to property insurance markets.

The research showed that, in communicating with customers, it is important to understand that people:

• identify with local, recent events that they can imagine happening to them,

•  deal with the ‘here and now’,

•  act if everyone else is acting,

•  look to sources of authority for advice, especially in a crisis.

People in the Midlands identified flooding as the main climate risk affecting them, Londoners identified drought and water shortages and Scots viewed storms as their main threat.

When asked in the context of protecting their homes, two thirds of people considered themselves as having responsibility to act on climate change, a far higher number than found in previous government surveys.  4 in 10 people were interested in climate-friendly or climate-proof insurance products.