Billions in climate related losses are pushing up insurance costs
Published on 10/12/2024
An annual scorecard for insurance companies has found they are ‘fundamentally misunderstanding’ climate risks.
Climate change has been behind over a third of all weather-related insurance losses over the last 20 years, a new report from the campaign group Insure Our Future has found.
In total, that is an estimated $600 billion (€567 billion) in losses from climate change - an immense price tag insurance providers have been passing on to policyholders.
Few regions have been spared in 2024. The UK, for example, saw $190 million (€180 million) in insured losses from Storm Henk’s extreme rainfall. This rainfall is estimated to have been made four times more likely by climate change.
Europe saw its second-highest insured losses from flooding ever this year, according to Swiss Re Institute's estimates. Estimated losses from natural disasters are expected to exceed $135 billion (€128 billion) in 2024 alone.
Insure Our Future’s annual scorecard for insurance companies warns that urgent action is needed to tackle escalating climate risks that could leave vulnerable communities completely unprotected.
Rising emissions are driving up losses
Over the last decade, losses attributed to climate change have risen from 31 per cent of all weather-related losses to 38 per cent.
This growth in the share of overall weather losses shows decarbonisation is crucial to tackle soaring insurance costs, the report says.
“Insurers are fundamentally misunderstanding climate risk by failing to recognise how greenhouse gas emissions have driven up losses throughout this century,” said Professor Ilan Noy, climate attribution economist at Te Herenga Waka - Victoria University of Wellington and author of the largest peer-reviewed study on how much climate change contributes to weather extremes.
“Unless we cut emissions sharply this decade, climate damages will grow exponentially and could overwhelm both insurers and economies.”
Insurance is also being pushed out of reach for many vulnerable communities, as companies manage rising costs by increasing premiums or even withdrawing coverage completely from high-risk areas.
“Insurers are taking advantage of an unstable climate to generate record profits, to the detriment of their customers and the benefit of their shareholders,” says Ariel Le Bourdonnec, insurance and reinsurance campaigner with Reclaim Finance, which carried out research for the report.