The world’s climate is changing, due mainly to human behaviour, and the effects are predicted to
intensify progressively. Already the insurance industry is faced with significant challenges, such as
the increase in flood risk in the UK. However, the need to manage climate change risks effectively,
and deploy clean technologies to avoid further global warming will increase the demand for insurance
products and services, and presents the industry with numerous opportunities.
Main Report |
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Foreword & Executive Summary
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Chapter 1:
Introduction
Dr Andrew Dlugolecki, FCII
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Explains briefly how climate change is relevant to the insurance 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) |
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Chapter 2:
Developments since 2001
Dr Andrew Dlugolecki, FCII
Peter Bolster, ACII
Andy Couchman, CertPFS, FCII, Chartered Insurance Practitioner
Alan Milroy |
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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) |
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Chapter 3:
The science of climate change – implications for risk management
Maureen Agnew,
Dr Clare Goodess,
Phil Jones,
Tim Osborn |
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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) |
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Chapter 4:
Climate change and its implications for catastrophe modeling
Kevin Bermingham, ACII
Claire Crerar
Dr Andrew Dlugolecki, FCII |
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Explores the use of 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) |
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Chapter 5:
Market failure and climate change
Martin Dockrill
Nick Ford, FCII
Dr Andrew Dlugolecki, FCII |
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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) |
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Chapter 6:
Capital markets and climate change
Julian Harpum, FCII |
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Examines innovations in the area of alternative risk transfer (ART) products to offer new insurance markets associated with climate change. (11 pages) |
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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 |
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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 to be significant, because the number of losses will be relatively small, or cover is not provided. (48 pages) |
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Chapter 8:
Small and medium-sized enterprises
Prof David Crichton, FCII, Chartered Insurance Practitioner |
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SMEs are not prepared for the impacts of climate change, despite the fact that the smaller the business the more vulnerable it is to climate shocks. (8 pages) |
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Chapter 9:
Major companies
Nadin-Shirin Lambert, Chartered Insurance Practitioner
Alan Milroy
David Clark, FCII, Chartered Insurance Practitioner |
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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) |
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Chapter 10:
Liability risk
David Martin
Sarah Aslett-Jones, FCII, Chartered Insurance Practitioner
Dr Andrew Dlugolecki, FCII
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Insurers’ clients may be exposed to claims that they did not reasonably foresee 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) |
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Chapter 11:
Construction industry
John Walden, FCII, Chartered Insurance Practitioner |
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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) |
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Chapter 12:
Energy industry
Ian Coates, FCII
Cristina Hall, ACII, Chartered Insurance Practitioner
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Chronologically reviews changing fortunes in the energy sector particularly in the US, considering 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) |
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Chapter 13:
Farming and forestry
Joanna Bean, ACII
Dr Andrew Dlugolecki
David Martin, Chartered Insurance Practitioner
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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) |
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Chapter 14:
Tourism and leisure
Dr Allen Perry
David Rochester
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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 these industries operate, focuses on specific areas to demonstrate the higher level of analysis that might be need in the future, and presents likely implications for insurers. (13 pages) |
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Chapter 15:
Life & health insurance, pensions and mortgages
Andy Couchman, CertPFS, FCII, Chartered Insurance Practitioner
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Considers the inter-relationship of climate change with human health and longevity, and demographic trends, and hence the life insurance and pensions business. The analysis then moves to the considerable negative implications for mortgage business and its potential consequences on the economy. (17 pages) |
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Chapter 16:
Investment
Nick Silver
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Examines the climate change implications of investments including cash and short-term bonds, equity, and other investment classes. Also reviews the implications for practitioners. (10 pages) |
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Chapter 17:
Carbon markets
Julian Richardson
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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 for the insurance and financial services industry. (16 pages) |
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Chapter 18:
Sustainability as a principle of risk management of climate change
William Buist, ACII, Chartered Insurance Practitione
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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) |
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CII Thinkpieces |
The Science of Climate Change
Maureen Agnew and Ana Catalano |
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Starts of the CII Climate Change Thinkpiece series by summarising Chapter 3 of the Main Report |
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Previous CII reports and papers |
Article: The future of flood management in the UK (2007)
Prof David Crichton, FCII, Chartered Insurance Practitioner |
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Published in CII Journal of Insurance Risk & Practice, Dec 2007. Examines lessons learned on flood defences from 2007 floods in England and makes recommendations for insurers, government and the public. (8 pages) |
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Report: Climate Change and Insurance (2001)
Dr Andrew Dlugolecki, FCII (editor) plus 10 other researchers |
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Detailed report by a team of 10 researchers exploring all aspects of climate change and its implications on insurance, following on from 1994 research as well as UK government and international research on the subject. (110 pages) |
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Report: The Impact of Changing Weather Patterns on Property Insurance (1994)
Dr Andrew Dlugolecki, FCII and 8 other researchers. |
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Detailed report of a group of the CII Society of Fellows examining in detail issues that face the insurance industry arising both directly and indirectly from changing weather patterns (rather than detailed underwriting or claims issues). Focuses specifically on land-based insured property. (86 pages) |
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