The news is frequently racked with catastrophic stories about one natural disaster after the next. In recent months we have seen a Tsunami flood Japan, the ‘worst hurricane in the world’ sweep across America and several earthquakes in Argentina as well as China. The natural world has devastated man made constructions, cities and countries in swift succession, and will only continue to do so as climate change evolves. But the question that many people are asking is who will foot the bill?
The effects of climate change and natural disasters on the Insurance industry is not unknown. 2005’s Hurricane Katrina cost in excess of $70 Billion dollars and Japan’s recent damages are estimated to rival that amount. A meeting of the Union of Concerned Scientists last week, revealed estimations that “economic losses from natural disasters have climbed from an average of $25 billion each year during the 1980s to $130 billion annually this past decade.”
The big question I want to pose is what the insurance industry is doing to prepare for the effects of climate change in the future?
In a time of economic recession, where many companies are desperately trying to keep their heads above water, it seems hard to think about anything but the present, let alone budgeting for future uncertainties. Yet if predictions, theories and the course of history are anything to take note of, this tumultuous world is not settling down anytime soon and contingencies need to be put in place.
The insurance industry needs to work with government so as not to burden each other with massive bills. Clever insurers should be innovating solutions to prevent the damages from natural disasters; working with government to negotiate terms for the effects and counter effects of future natural disasters. Infrastructure damage, power outages, business interruption, manufacturing decline and the cost of clean up are each trends which will have their own myriad counter trends to boot.
2011 has already seen two major natural disasters and there is a strong likelyhood that there will be more to come. A year ago insurers were focused on working through the mess of the Haiti earthquake and in a years time the focus will have moved from the current position of Japan elsewhere again. Smart insurers will not only look at the contingencies necessary to respond to climate change but also to the opportunities for innovation to ensure a more sustainable economic future.
Where do you think the insurance industry should be looking and what should they be doing to put contingencies and efforts in place of climate change? Let me know in the comments section below.
