The world has been experiencing various signs of climate change, yet many people fail to consider the reality of this environmental phenomenon. However, Deloitte’s 2019 Insurance Outlook foresees climate change as a key trend in maintaining the sustainability of the industry. According to Deloitte, there is a push towards considering this environmental issue in formulating risk management strategies. In fact, some regulators advocate for the inclusion of this phenomenon in the Risk and Solvency Assessment of the National Association of Insurance Commissioners (NAIC).
The Impact on Insurance
Deloitte used the Bank of England’s (BoE) 2016 study to look at the effects this phenomenon has on the central bank. According to the study, any natural disaster linked to the global and regional climates and climate change can result in losses for banks and insurers alike.
Insurance Industry in the U.K.
In light of this, reports by The Independent show that the BoE has also urged banks and insurers to consider this environmental issue as a key factor in creating policies. In an interview, Financial Conduct Authority chief executive Andrew Bailey states that this issue has led to global legal frameworks adapting greener finance products.
Aside from rising costs and potential losses for insurance companies, climate change has urged insurers to cease coverage for fossil fuels known to contribute to this phenomenon. Some companies are also investing in eco-friendly ventures. Perhaps with changes in global climate directly affecting financial industries, more people and insurers will recognize the seriousness of this environmental issue and its causes.