Climate change has had a negative impact on many industries, including the insurance sector which is why more effective risk management solutions need to be sought after through the synergy of competent insurance underwriting and careful risk selection.
As climate change progresses, an increasing number of fixed asset claims will occur. The change in frequency of weather-related incidences has resulted in the need for risk models to be continuously reassessed in order to mitigate the severity of losses.
Climate Change and Extreme Weather Conditions
Hand in hand with climate change, human abuse and pillage of our natural resources has been proven to be the driving force behind extreme weather conditions. There is a direct correlation between to this and the increased frequency of storm and fire related claims experienced by the industry in recent years. In South Africa alone, there has been an influx of natural disasters in recent years, from the disastrous Knysna fires, the flooding in Durban, as well as the severe hailstorms experienced in Gauteng. Other adverse climate conditions which effect South Africans, particularly the agricultural industry, are the severe drought conditions experienced across the country.
Proactive Risk Management Solutions
As mentioned earlier, the industry needs to reassess its risk models in order to make provision for the additional risks caused by the changing weather patterns. Severe weather conditions have a negative effect on all sectors, which is why home, agricultural, and business risk management solutions are needed. For business risk management, unnatural elements also need to be taken into account. There is a clear lack of vision and skill especially when high rise structures are built leading to exposures prone to result in losses.
By learning from previous disasters, Insurers and policyholders should gear themselves up to manage risks that will allow for greater sustainability and efficient management. By coming up with new business risk management solutions that take the effects of climate change and our exposure as humans into consideration, Insurers will be in a position where they can effectively provide clients with the right cover for their needs.