Insurers call climate change the ‘mother of all risks’

The UK is set to miss a hardly ambitious target of providing 15 per cent of the country’s energy needs from renewable sources by 2020, according to MPs. A report from the Parliamentary Energy & Climate ChangeCommittee says that it is three quarters of the way towards a 30 per cent sub target for electricity generation, and should exceed it, but the country is not even half way towards hitting a 12 per cent target for heat while the proportion of renewable energy used in transport actually fell last year.
The targets were set under the EU’s renewable energy plan, and before you say “Brexit” we still have to meet them. UK law is currently based upon them, but even were that not the case, it is in our own economic self interest to start acting. Failure will not only damage the UK’s supposed reputation for climate change leadership, it will contribute to the reality of it, and therefore it will have a demonstrable economic impact that some people are already starting to feel.
Scientists have been urging action for what seems like forever, but, of course, “Britain has had enough of experts,” as arch Brexiteer Michael Gove once said. Does that extend to insurers? It oughtn’t to because if they feel unhappy about the potential impact of climate change they will charge us more for cover. Swiss Re knows a thing or two about global catastrophes because its business is to provide protection against them. It insures other insurers and so has to know all about the risks they protect against. It takes climate change very seriously.

According to the company’s sigma report, that came out a couple of years ago it, the cost of it could soar to a staggering 20 per cent of Global GDP by the end of this century. Think of that this way: it’s one pound out of every fiver in your pocket. British insurers have made similar points. Just last month Aviva’s boss Mark Wilsondescribed climate change as “the mother of all risks — to business and to society as a whole.”Mr Wilson isn’t a tree hugger, or a detached scientist. He’s a hard headed businessman who knows that climate change is going to cost an obscene amount of money if we don’t act. It’s also going to push insurance premiums through the roof.

Want more? Here’s Matt Cullen, head of strategy at the Association of British Insurers: “Insurers pay close attention to climate change and are strong supporters of efforts to restrict rising global temperatures because they, and their customers, have to live with the consequences. More extreme weather events, and increasing uncertainty about climate risks, mean more claims, more volatility and — in the worst cases — insurability problems for consumers desperate to protect their homes and livelihoods”.
We’ve already seen evidence of the latter happening, with the Government having to assist with the creation of Flood Re, set up to underwrite flood insurance cover in at risk areas for homes built before 2009. Climate change means more rainfall, which means an increased risk of flooding. That has already made some properties uninsurable. Insurers protect against the risk of something happening. It is uneconomic for them to protect against an occurrence that has gone from being a risk to an all but a yearly event. Flood Re, the creation of which was accompanied by a Governrment promise to step in with funds if necessary, provides a sticking plaster for now. But will it be viable in the face of what may come? We may soon find out.

Just its creation provides demonstrable evidence that the economic costs of climate change are being incurred now. This isn’t a Brexit style debate over what might happen in the future should we stay in or walk out. It’s happening in front of our eyes. So to ministers, who are usually keen to listen to businesses, but seem to respond to their complaints about inaction over climate change with a tin ear. And to that report I mentioned.The decision last year to effectively end public support for onshore wind, the cheapest form of renewable energy, while paring back support for offshore and solar, tells you all you need to know about the direction of travel. You wonder what it would take for to make minsters wake up? London finding itself under water? But then it would be too late.Of course, the UK is only part of the climate change equation, a relatively small one when compared to the top global polluters, China and the US. But the UK’s complacency, and its declining to meet even modest targets for the use of low carbon renewables, sends a message out to others. It says this isn’t an issue that we need to worry too much about. It is. It the the mother of all risks. Just listen to Mark Wilson, whose business is all about risk.

Source : The Times of India

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