World-wide insurance industry leader Lloyd’s of London has issued a call for insurers to begin adding the impacts of climate change and sea-level rise into the risk calculations that insurers make when writing policies. In an article in the UK’s Guardian newspaper, Lloyd’s noted that annual average losses had quadrupled from the 80s to the last decade. A Lloyd’s representative indicated that since climate change is here to stay, it may be necessary for insurance companies to increase the amount of capital they keep on hand to cover losses. A new Lloyd’s report also indicates that past sea-level rise may have been responsible for up to $8 billion dollars in additional flooding losses in New York City during Hurricane Sandy.
Despite the focus of Lloyd’s of London and other reinsurance companies such as Swiss Reinsurance and Munich Reinsurance on increasing costs of disasters due to climate change, a 2012 special report of the Intergovernmental Panel on Climate Change called “Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation” (summary and full report available here) observed that while disaster losses have indeed been rising, all the causes of this are not yet clear. One cause that is clear, states the report, is that we have increased dramatically the amount of people and valuable infrastructure in hazardous areas. While the report does not say that climate change and sea-level rise do not play a role in the increase, it says that the evidence that they are contributing is not yet clear.