As published in ANZIIF Journal, Vol 30, No.2, Apr/May 2007

As underwriters of a large proportion of the more than $1500 billion of assets comprising the built environment in Australia, the insurance industry’s single biggest threat is the natural disaster, and the link between climate change and increased frequency of extreme risk events, one of its growing concerns.

Survey participants to the most recent JP Morgan Deloitte General Insurance Survey (2006) were of one voice in responding to the question of the impact of climate change on premium pricing, capital and claims management. The continuing challenge, insurers say, is to structure underwriting capacity and policy deductibles in an equitable rather than punitive way for new and renewal business. Pricing approaches and risk management practices are two other areas identified as needing to change in order to adequately meet the business requirements arising from climate change.

In this article, originally published in the Journal of the Australian and New Zealand Institute of Insurance and Finance (Vol 30, No. 2, April/May 2007), Deloitte partner Paul Franks and Boral Sustainability Manager David Newhouse, review the industry’s position. They outline the main issues faced and suggest steps insurers need to take to be well positioned in terms of new commercial imperatives and a potentially fluid regulatory agenda.

Read Climate change: insuring the built environment for extreme weather events in full.