It warns that the speed at which global oceans are warming is threatening the industry’s ability to sell affordable policies around the world, with parts of the United Kingdom (UK) and the U.S. state of Florida already facing “a risk environment that is uninsurable.”
And these areas are unlikely to be the last that will experience such problems.
But in the UK, hundreds of thousands of homeowners in areas at high risk of flooding will still be able to insure their properties, after the government struck a deal with the industry.
The deal—introduced as part of the government’s new water bill—comes just weeks before the current agreement is set to expire and follows lengthy negotiations with the Association of British Insurers.
The agreement will cap flood insurance premiums, linking them to council tax bands so that people in high risk areas will know the maximum they will have to pay, while a levy on all UK household insurers will be used to create a fund to cover claims for people in high-risk homes.
The new bill also includes plans to increase competition in the water market and improve drought resilience. Meanwhile the government announced an extra £370 million of flood protection funding for 2015-2016 and committed to increase funding each year to 2020—adding to the £2.3 billion they say is currently earmarked for flood defenses.
There has been rising friction in recent years between the insurance industry and governments around the world who are struggling to shore up flood protection.
The Geneva Association—which is overseen by executives from some of the world’s largest insurance firms—warns that governments will have to step up their action to protect their towns from the effects of climate change.
Warming oceans have already locked-in shifts in climate, even if countries’ attempts to reduce greenhouse gases proved successful.
John Fitzpatrick, secretary general of the Geneva Association said:
Given that energy from the ocean is a key driver of extreme events, ocean warming has effectively caused a shift towards a “new normal” for a number of insurance relevant hazards. This shift is quasi irreversible—even if greenhouse gas (GHG) emissions completely stop tomorrow, oceanic temperatures will continue to rise.
As oceans warm, they expand, contributing to rise sea levels. Melting ice sheets and glaciers are also contributing.
The average global sea has risen nearly 20cm over the past century—with faster rises seen in more recent years. In its most recent report in 2007, the Intergovernmental Panel on Climate Change estimated that the sea levels rose an average of 1.8mm per year from 1961 to 1993 and 3.1mm from 1993 to 2003.
As well as rising sea levels, scientists believe warmer oceans contribute to an increase in evaporation from the surface of the seas, leading to heavier rains and the potential for more storms.
Such factors may have contributed to Hurricane Sandy, which hit New York and New Jersey last year, costing the U.S. economy about $65 billion, warns the Geneva Association.
Earlier this month, New York Mayor Michael Bloomberg announced a $20 billion plan to protect the city from future storms including building flood walls, levees and gates as well as funding for flood proofing measures for property owners and hospitals.
The number of weather catastrophes, including storms, heatwaves and forest fires have risen from around 300 a year in 1980 to around 900 in 2012, according to figures from reinsurer, Munich Re.
The new report calls on governments to invest more in flood defenses and tighten building restrictions in risky locations to mitigate the fallout of extreme weather hazards. They warn of the growing trend for an increasing number, and value, of properties being built along waterways and coastlines—pushing up the cost when disaster hits.