Aside from a few hard-core climate deniers, most of us have woken up in recent years to the fact that we are irreparably damaging our planet and need to do something about it fast.
Evidence of climate change is all around us, especially here in Asia. Back in 2014 the Intergovernmental Panel on Climate Change (IPCC) issued a report warning that Asia would bear the brunt of climate change and that prediction seems to be coming true with the region experiencing a significant increase in the number, intensity and impact of extreme weather conditions such as flood, drought, heatwave and tropical cyclones. Smog has been a major issue in both Thailand and Vietnam this year, exacerbated, if not caused, by climate change.
The September 2018 earthquake in Indonesia caused damage estimated at $1.4billion while flooding in India in 2018 caused an estimated $2.9billion of damage according to figures from the Asian Development Bank. These kind of extreme weather events inevitably mean a big hit for insurance companies.
It’s not just Asia that has been hit though. Globally there has been a massive increase in extreme weather including flooding, heatwaves and winter storms. In the UK, for example, the Association of British Insurers (ABI) reported that insurers paid out a whopping £194million over three months in early 2018 due to burst pipes which were the result of an extreme freeze. That’s a huge figure however it is dwarfed by the estimated $10billion of insured losses due to damage caused by Hurricanes Florence and Michael in the US.
It’s no surprise that insurance execs are worried – their bottom line is being threatened. The ABI’s director general, Huw Evans, recently said: “Insurers are on the front-line dealing with the results of rising temperatures and changing investment needs, and so understand better than most the serious implications of a changing climate. We need a sustained and ambitious response to protect homes, businesses and communities around the world.”
The ABI is part of a global insurance industry collaboration focused on driving action on climate change risk called ClimateWise. Providing affordable protection against natural disasters is one of the thorny issues ClimateWise is wrestling with.
For now, the cold hard fact is that as claims go up, there is really only one possible response from the industry and that is to put up premiums to counteract the increasing risk. Unfortunately, you are likely to see the cost of your home insurance rise over the coming years.
In spite of the growing cost of insuring your home, we don’t recommend that you skip insurance. Indeed, with the likelihood of your home suffering from a climatic event increasing, it is becoming more important than ever that you ensure that you have sufficient protection in place. And that means having adequate cover for major repair and rebuilding costs in the eventuality of extreme weather causing significant damage to your home as well as accurately costing up the value of the contents of your property so that in the event of it being destroyed or damaged by fire, flood or a typhoon, your sum insured fully covers everything. Underinsurance is a very common problem and can mean that any payout in the event of a claim will not be sufficient to replace all that is damaged.
Unfortunately climate change is not going away any time soon. Let’s hope that with some of the world’s biggest companies finally starting to put pressure on governments to act more quickly to tackle rising global temperatures, climate change solutions can be found. Until that happens, make sure that you check your insurance cover and ensure that you are adequately protected in the event that you fall victim to an extreme weather event.
A leading provider of expat financial services and wealth management services across Asia.