Climate change expected to cost Irish insurance industry close to €1.5bn over next decade

The survey of 115 of Ireland’s leading insurance experts found that 38% put the cost of dealing with the impact of extreme events, such as flooding or storms, at between €1bn to €1.5bn. However, just over a third, 34%, said it would be more than €1.5bn. 

The survey was conducted at a Home and Motor Insurance Seminar, hosted by Deloitte, to discuss some of the biggest issues affecting the insurance sector, including extreme weather trends, climate adaptation, regulatory updates, and digital transformation.

It included representatives from across the industry as well as reps from Allianz, Axa, FBD, RedCLick and Zurich.

The survey also found that a majority of respondents (76%) believe the Government should invest in national and local flood defenses as a key initiative to address the increasing prevalence of extreme weather events.

This was chosen ahead of acting as a reinsurer of last resort (17%) and providing subsidies or financial support for climate adoption measures (7%). 

Nearly half of those surveyed, 49%, said the Irish Government should set up a pooled insurance risk initiative, such as Flood Re in the UK, to improve the availability of flood risk insurance.

Flood Re is a joint initiative between the UK Government and insurers aimed at making the flood cover part of household insurance policies more affordable

Speaking at the Home and Motor Insurance Seminar, Noel Garvey, Actuary and Partner in Audit & Assurance at Deloitte, said: "As a society, we all have to understand that prevention goes hand-in-hand with mitigation.

"The insurance sector needs to ensure it is equipped with the latest data and insights to evaluate and manage risks effectively.

"From the increased frequency of flooding to the risks posed by changing weather patterns, now is the time to stay one step ahead wherever possible, to prepare us all for new and emerging future weather-related risks.

"While the survey of insurance experts at our event is a snapshot of the challenges the insurance sector is experiencing, it has fascinating insights including more than a third (38%) thinking the cost of climate change for insurers will run from between €1bn to €1.5bn, with a further 34% expecting costs of over €1.5bn euro and potentially as much as €5n euro.”

“When uninsured losses are included in the overall cost of damage to infrastructure, property, agriculture and human health the total economic losses from extreme weather-related events will be substantially higher than these estimates.”

He added: "The Programme for Government lays out clear and credible plans for climate adaptation, backed by initiatives like the National Adaptation Framework and the Climate Action Plan.

"However, what matters now is delivery. We are encouraged to see insurers engaging in a future-focused and active way to align their strategies with national goals.”

Meanwhile, Keith Lambkin, Head of Climate Services at Met Éireann, highlighted the increasingly important role of standardized climate projections when it comes to national infrastructure planning:

"The Translate project is focused on standardizing national climate projections, which will make it a crucial tool for decision-makers in all sectors, whether agriculture, finance, or housing," he said.

"The consistent and standardized data will mean we can all make smarter and more informed decisions.

"It makes sense for insurers, governments, and private sectors to work from the same baseline to accurately assess and manage risks going forward.”

Lambkin said smarter infrastructure decisions were also needed.

"In sectors like road building, for example, integrating climate projections ensures drainage systems can handle future rainfall intensity," he added.

"Similarly, for housing, we can adapt building standards to make properties more resilient to extreme weather.

"It’s about reducing exposure through forward-looking planning and collaboration."

Rosemarie Lawlor, Met Eireann’s Chief Hydrometeorologist said meteorological and hydrological data is being integrated to provide ever more accurate flood forecasts.

"The Flood Forecasting Centre at Met Éireann is the first step of a whole government approach to managing flood risk, in view of the increasing frequency and intensity of weather events caused by climate change," she explained.

"In collaboration with other state partners, we are providing these forecasts and other related guidance to emergency responders and local authorities to enable an information-driven approach to managing potential flood events.”

* This article was originally published on BusinessPlus.ie.