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Climate Change effects on Insurance Premiums

How is climate change impacting your insurance premiums?

Insurers and re-insurers worldwide have taken significant financial hits as a result of both natural and man-made catastrophes, such as wildfires, in 2017.

Rating agency Fitch Ratings has projected the 2017 catastrophic losses for the global insurance and reinsurance sectors will conservatively exceed US$135 billion, with Hurricanes Maria and Irma estimates at US$85 billion and US$50 billion respectively.  Individual insurers have been posting their natural catastrophe losses, with XL Group revealing a US$1.03 billion operating net loss in the third quarter, and Berkshire Hathaway expected to post its first full year underwriting loss in 15 years of over US$3 billion.

Insurance losses from weather events will continue to increase in both severity and frequency, with billion dollar storms becoming the new standard.  In Canada, a national advisory council on climate change is being developed comprised of insurers, all levels of government and other key stakeholders to build a culture of climate resilience, particularly with respect to overland flood and the correlation between climate change and its impact on seismic activity.

The insurance industry remains well capitalized, and insurers are re-focusing their efforts to create and use data modelling to aggregate their exposures in susceptible regions, buy reinsurance effectively, and price risks accurately but competitively.

How do you best position your organization’s risk in the insurance marketplace?

Devote resources to loss control. Reducing the severity and frequency of claims has a direct impact on containing insurance costs. Internal risk control efforts, such as developing emergency response plans (particularly for domestic water response) and being well prepared for insurer location inspections, demonstrates to your insurers that your organization is committed to managing exposure to loss.

Use the loss control tools your insurance partners offer to strengthen resilience and engage directly with your insurance partners sufficiently prior to renewal negotiations to promote your risk. Use your insurance coverage for the higher severity losses, not for the low value or frequent losses.  As the insurance market looks to recoup their sizable losses and model for future losses particularly with respect to severe weather events, it is essential to shield your organization as best you can from the impact of general insurance rate hikes.

For more information on the effects climate change has on insurance premiums and marketplace, please contacts one of our consultants.




Janet Reeve
Managing Director, Risk & Insurance Services.





INTECH Risk Management (“INTECH”) is an independent insurance consulting company involved in the analysis, design, development, implementation and management of insurance programs. INTECH does not sell insurance, nor is it affiliated with any insurance company or brokerage.  This unique independent position in the marketplace enables our consultants to avoid conflicts of interest and provide our clients with unbiased, expert advice. INTECH has received the 2017 Award for Excellence in Risk Management from Insurance Business Canada, the 2017 Insurance Adviser of the Year as well as 2015 and 2016 Due Diligence Provider of the Year Award from IJGlobal, and has achieved Platinum Elite Status on ReNew Canada’s Top100 Projects.

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