Climatic change : impact on insurance industry

Abstract

As a general overview, it can be deducted that over the past decade, there has been a fundamental shift in international, as well as local, policy debate and focus. Consequently, the state of the environment has become one of the top policy issues. Climate Change is a consequence of the abuse that past and current generations have meted out on the environment - a consequence, which if taken to the worst possible case scenario, will negatively affect today's and future generations. Various international and local Non-Governmental Organisations (NGOs) through the past years started to put pressure on their respective governments as these organisations are seeing that this issue is being put aside as climate change effects are gradual and hence various governments prefer to prioritize other issues. Climate change is already here, and will have an increasing effect on the economy and the natural environment. Within decades, glaciers are projected to decline, reducing water availability for billions of people and enterprises. At the same time, heavy precipitation events and sea-level rise will increase flood risks. This paper examines climate change mitigation and adaptation from an insurance industry perspective, with particular reference to Malta. This research presents a study of how recent changes in climate are influencing the decision making processes of present insurers and how insurance companies are adapting to such changes. The analysis of such challenges may provide information linking the behaviour of these climatic changes to the possible dynamic changes of the insurance industry. This study sought to determine how insurance companies could shape their public policy and use new technologies to manage climate change risks and make a plea for society to make more use of insurance expertise in future decision making. Following several interviews and questionnaires, the insurance industry can be compared to a 'sleeping giant' in this particular issue. This paper concludes that the insurance industry has much to contribute in terms of Climate Change but still there is need for greater research and increase in awareness campaigns. Moreover, findings support the fact that government intervention is required in shaping the minimization of future losses.