Without adaptation, insurance losses from coastal flooding for high-risk properties could double by 2030, according to a new report published today by Lloyd’s and Risk Management Solutions (RMS).
The research shows that, with an effective adaptation strategy, future losses could be reduced to below present-day levels with losses for high-risk properties reduced by as much as 70%.
The Coastal Communities and Climate Change report examines the impact of climate change on flood risk at a number of coastal locations in Europe, Asia and the Caribbean, and the benefits of a variety of adaptation measures including flood defences, elevating property (eg on stilts), and changing the property’s characteristics to make it more flood resilient.
Sea levels are projected to rise by at least half a metre during this century, dramatically increasing the risk of flooding in coastal areas. The report argues that poor land-use policy and growing urbanisation are exacerbating the risk of flooding in these areas.
The report also suggests that the insurance industry can play a significant part in encouraging adaptation by policyholders through incentivisation. This can be achieved through risk-based pricing where policy premiums are set at a level that more closely reflects the underlying risk to which properties are exposed.
Speaking at the launch of the report, Lloyd’s Chief Executive, Dr Richard Ward, commented: "With over half the world’s population expected to live within 100 kilometres of the coast line in 25 years’ time, it is imperative that we address this risk now by starting to adapt. The world cannot insure its way out of climate change, but the insurance industry can play a key role in the fight against it by encouraging adaptation, and if this doesn’t happen insurance will become more expensive and less available."
Hemant Shah, RMS Chief Executive, said: “As sea levels rise - along with changes in the frequency, intensity and geography of extreme weather events - risks will increase. Adaptation can reduce future losses, and to be successful, adaptation plans must be location-specific and risk informed. They must also begin today.”
Co-authored by Trevor Maynard, Manager of Emerging Risks at Lloyd’s and Bob Ward and Nicola Patmore at RMS, Coastal Communities and Climate Change is the fourth Lloyd’s 360 risk project report on climate change. The Lloyd’s 360 risk project aims to generate discussion and debate about today’s key risk issues and how best to manage them.
For further information, please contact:
Louise Shield
Tel: +44 (0)20 7327 5793 Fax: +44 (0)20 7327 5229 Email:
louise.shield@lloyds.com
Marc Charlton
Tel: +44 (0)20 7327 6125 Fax: +44 (0)20 7327 5229 Email:
marc.charlton@lloyds.com
Bart Nash
Tel: +44 (0)20 7327 6272 Fax: +44 (0)20 7327 5229 Email:
bart.nash@lloyds.com
For urgent out of hours media calls Tel: +44 (0)7659 597 825
Find out more about Lloyd's
Lloyd's is the world's leading specialist insurance market. Lloyd's underwriting capacity at 1 January 2008 is £15.95 billion which will be underwritten through 75 syndicates (including SPS and RITC syndicates), managed by 46 managing agents and supported by 176 brokers. It is the world's third largest non-life reinsurer, and is the second largest surplus lines insurer in the US.
Lloyd's is regulated by the Financial Service Authority.
