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Coping with climate change :

risks and opportunities for insurers

Publication date:

01 May 2009

Last updated:

22 September 2017


Chartered Insurance Institute

The Chartered Insurance Institute's third major study into the effects of climate change for the insurance sector looks at strategic issues that face the insurance industry from the perspective of UK-based practitioners, including the London Market, and in critical areas of developing countries.

Foreword and executive summary

Chapter 1: Introduction
Dr Andrew Dlugolecki, FCII

Explains briefly how climate change is relevant to the industry's task of managing risk in its various functions, places the study in the context of other work, outlines the research process followed by the authors, and sketches out the approach. (5 pages) 

Chapter 2: Developments since 2001
Dr Andrew Dlugolecki, FCII
Peter Bolster, ACII

Andy Couchman, Cert PFS, FCII, Chartered Insurance Practitioner
Alan Milroy

Summarises recent developments since the last full CII report in 2001. Covers recent weather events, politics and government policy, business attitudes, insurance industry responses including the insurance market. (32 pages)

Chapter 3: The science of climate change - implications for risk management
Maureen Agnew
Dr Clare Goodess
Phil Jones
Tim Osborn

Explains that further increases in temperature are inevitable, based on evidence collected by the Intergovernmental Panel on Climate Change as well as other studies. (37 pages) 

Chapter 4: Climate change and its implications for catastrophe modeling
Kevin Bermingham, ACII
Claire Crerar
Dr Andrew Dlugolecki, FCII

Explores the different types of catastrophe models for examining scale of weather-related losses. Includes hurricane risk, and future synergies between climate science and catastrophe modeling. (23 pages)

Chapter 5: Market failure and climate change
Martin Dockrill
Nick Ford, FCII
Dr Andrew Dlugolecki, FCII 

Identifies the potentials for substantial markets to become uninsurable as a result of climate change events. Provides an overview of ways in which the market can fail to operate, including in developing countries, and provides recommendation. (29 pages)

Chapter 6: Capital management and climate change
Julian Harpum, FCII 

Examines innovations in the area of alternative risk transfer (ART) products to offer new insurance markets associated with climate change. (11 pages)

Chapter 7: Personal lines - floods and storms
Prof David Crichton, FCII, Chartered Insurance Practitioner
David Clark, FCII, Chartered Insurance Practitioner
Dr Andrew Dlugolecki, FCII
Malcolm Johnson, ACII

Deals with the impacts of climate change on the Personal Lines Property account in the UK. The key issues are flood, followed by storm and subsidence. Climate change could increase the incidence of damage or loss of buildings through other hazards, such as forest fires, insect infestation, or mould, but these are unlikely the be significant, because the number of losses will be relatively small, or cover is not provided. (48 pages)

Chapter 8: Small and medium-sized enterprises
Prof David Crichton, FCII, Chartered Insurance Practitioner 

SMEs are not prepared for the impacts of climate change, despite the fact that the smaller business the more vulnerable it is to climate shocks. (8 pages)

Chapter 9: Major companies
Nadin-Shirin Lambert, Chartered Insurance Practitioner
Alan Milroy
David Clark, FCII, Chartered Insurance Practitioner

Focuses on the particular issues that climate change creates for insuring major commercial clients. Describes the special characteristics of commercial clients, and briefly reviews how climate change could affect them. Looks at property damage, business interruption, and claims handling. Finally, other implications of climate change for large commercial clients are briefly discussed. (20 pages)

Chapter 10: Liability risk
David Martin
Sarah Aslett-Jones, FCII, Chartered Insurance Practitioner
Dr Andrew Dlugolecki, FCII

Insurers' clients may be exposed to claims that they did not reasonably forsee the possibility of weather-related damage. Examines the main issues that liability insurers face from climate change, and makes recommendations for their procedures, and their interactions with other stakeholders like policyholders and politicians. (19 pages) 

Chapter 11: Construction industry
John Walden, FCII, Chartered Insurance Practitioner 

Examines the effects of climate change on construction risk, but also how construction works significantly alter pre-existing environmental conditions. The focus of attention is major contracts. Central to this discussion are sound planning and risk management in the context of climate change. Design, materials and workmanship are major concerns for insurers since failure can involve catastrophic loss, and complex claims issues regarding the scope of insurance protection. (31 pages)

Chapter 12: Energy industry
Ian Coates, FCII
Cristina Hall, ACII, Chartered Insurance Practitioner

Chronologically reviews changing fortunes in the energy sector particularly in the US, sconsidering both upstream and downstream markets as well as other aspects. Looks at future of energy production linked to climate change and assesses implications for changes on energy insurance market. (33 pages) 

Chapter 13: Farming and forestry
Joanna Bean, ACII
Dr Andrew Dlugolecki, FCII
David Martin, Chartered Insurance Practitioner 

Analyses the effects that climate change will have on the agriculture and farming industries at both a UK and global level, particularly in developing countries, and the implications for the insurance industry. Includes an overview of the different relationships between agriculture and climate change and the resulting effects. (16 pages)

Chapter 14: Tourism and leisure
Dr Allen Perry
David Rochester

Examines the issues that may face insurers through the interactions of climate change with the tourism, leisure and sport industry. Explains how climate change is likely to influence how climate change is likely to influence how these industries operate, focuses on specific areas to demonstrate the higher level of analysis that might be needed in the future, and presents likely implications for insurers. (13 pages)

Chapter 15: Life and health insurance, pensions and mortgages
Andy Couchman, CertPFS, FCII, Chartered Insurance Practitioner

Considers the inter-relationship of climate change with human health and longevity, and demographic trends, and hence the life insurance and pensions business. They analysis then moves to the considerable negative implications for mortgage business and its potential consequences on the economy. (17 pages) 

Chapter 16: Investment
Nick Silver 

Examines the climate change implications of investments including cash and short-term bonds, equity, and other investmet classes. Also reviews the implications for practitioners. (10 pages)

Chapter 17: Carbon markets
Julian Richardson

Introduces the carbon emission trading markets and consider why a market-based system is the most effective policy option. It will also look at key existing regulatory frameworks including the Kyoto Protocol, the European and the UK Emission Trading Scheme as well as other initiatives around the world. outlines the challenges and opportunities ffor the insurance and financial services industry. (16 pages) 

Chapter 18: Sustainability as a principle of risk management of climate change
William Buist, ACII, Chartered Insurance Practitioner 

Studies the impact of sustainability for the insurance industry in terms of risk management and related matters. Discusses the nature of sustainability, and then considers the challenges for the industry. Looks at the impact in some specific markets including household and commercial property. Finally examines the impact of carbon trading and product design. (11 pages)


This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.


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