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Insurance premiums are rising, as extreme weather conditions are becoming more widespread



Updated

November 8, 2018 11:16:28

After the new actuarial index warned of an increase in financial risks due to extreme weather conditions, homeowners and businesses are likely to face higher insurance premiums.

Key points:

  • Climate index to be updated every season
  • Developed in co-operation with regulators and scientists dealing with natural hazards using national data
  • Potential losses from coastal erosion are valued at only $ 88 billion, with the exception of land value

Australia's Actuarial Climate Index addresses the risk factors, such as high sea levels, droughts, fires, cyclones, floods and extreme temperatures, because they are more frequent as evidence of climate change is increasing.

The index, developed by leading actuary and chief financial officer Tim Tim, Finity Consulting, warns that the frequency of extreme events this autumn was higher than in 1981-2010.

"It's fair to say that this is a fairly new area for everyone, and you can imagine, especially the insurers are worried that they have to pay the appropriate bonuses for the risk that they are taking," said Mr Andrew, ABC AM program.

"The index clearly shows that we have increased the incidence of extreme events. In the long run, many people in natural and flood risk areas could be expected to face some increase in premiums.

"One of the challenges we need to make is that we are building the qualities in the right places to ensure that we will reduce the impact in the future."

The Australian Precautionary Authority (APRA), which oversees banks and insurers, warned last year that the risk of climate change was "predictable, material and feasible".

APRA's chief executive, Geoff Summerhayes, said the index was an important step in developing interdisciplinary standards to detect threats and effects of extreme weather conditions for businesses, consumers, developers and governments.

"We believe this initiative is a positive step in helping regulators understand and manage the potential impacts of climate change on their business," Summerhayes said.

The index, updated quarterly and supported by the Office of Meteorology and CSIRO, is based on similar indices currently used in Canada and the United States.

Elayne Grace, Executive Director of the Actuarial Institute, said the index was "a first step" as actuaries developed more precise measures on climate risk.

"We hope to rely on this index, adding risk data, such as property damage and health statistics, to understand the relationship between weather and risk, allowing for more accurate risk indices," said Grace.

This index raises concerns about the future damage caused by climate change after the Climate Institute warned in 2016 that the potential damage from coastal erosion is estimated at $ 88 billion, with the exception of land value.

The index was developed in consultation with regulators and science of natural hazards, with data collected nationally and grouped in twelve climatically similar cases.

Tim Andrews wants to avoid politics related to the cynic of climate change, but hopes that the fight against climate change will not be delayed towards a better understanding.

"It is inevitable risk with these issues. I am often disappointed with politics, and I hope this letter will not go away."

Themes:

business economics and finance

insurance

climate change

Australia

First inserted

November 8, 2018 10:42:08


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