Facts & stats
Long-term historic climate patterns are now known to be much more volatile than the stability of the recent past would make us believe.
Until about 30 years ago, most experts agreed that climate change occurs slowly.
After analysis of ice-core records from the Greenland and Antarctic ice sheets, it is now clear change has been very rapid at times.
What does it all mean?
The impact of small-scale climate fluctuations over the last 1,000 years had a significant impact on society at the time. Future temperature changes are likely to be even greater and we might experience major disruption as a result.
What next?
Insurers need to consider the impact that an unstable climate could have on global asset values, which may generate a mismatch against insurance liabilities.
- Insurers rely on returns from assets to boost financial performance if these returns reduce then insurer profits will be lower. Consequently it will become even more important for insurers to price risk according to exposure, and to underwrite for profit, without reliance on investment income.
- The global financial services industry holds a significant proportion of the world’s financial assets. Insurance industry participants can therefore make a difference by using their influence as investors to encourage 'climate proof’ behaviour from the boards of large corporations.
- In addition to economic disruption from unstable climate, political unrest may result from competition for water and other resources, forcing demographic changes. Policies in respect of political and terrorism risks should be reviewed regularly to ensure the level of risk is within appetite.
