Cambridge University Study Analyzes Insurance Sustainability
(sustainabilityenvironment.com) – The more the negative impacts of climate change increase, the more insurance companies are reluctant to offer policies in regions most prone to extreme events. While in regions such as Florida or California insurance premiums have reached levels that are prohibitive for a large part of the population, it is not uncommon for insurance companies in countries that are most vulnerable to climate change to choose not to offer cover. Yet to protect these countries from climate risk would be enough to 1 billion dollars a year, without nasty surprises for insurance and reinsurance.
This is stated by a study by the Institute for Sustainability Leadership of the University of Cambridge that has examined the real sustainability of insurance for countries most prone to climate disasters. By dismantling the prevailing idea that it is economically impossible to protect these regions with the instruments we have today.
The study, shared in preview with the news agency Reuters, concludes that by analyzing the predictions on the future impact of extreme events such as floods, cyclones, drought, and rising sea levels in less developed countries, the latter can be insured against climate risk at least up to 2050 without disruption for reinsurers and other capital market players.
“This is a huge achievement because there is a preconceived assumption that these countries are untouchable,” explains Ana Gonzalez Pelaez, principal author of the study. “In fact, we have numbers that show that they can be insured”.
This is the basis for the contribution of the donor countries. With an outlay of 1 billion dollars a year – 1 cent of the volume of climate finance that the richest countries today convey to developing countries for mitigation and adaptation measures – Cambridge researchers argue that it would be possible to amortize so substantial insurance premiums, making policies more accessible to the 100 most vulnerable countries.
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Even providing just $10 million per country, according to the study’s projections, these funds could yield from $200 to $300 million per country in pre-established annual protection, totaling $25 billion when distributed in 100 countries. “The idea is to use this new source of funding to structurally protect these countries,” said Rowan Douglas, co-author of the research. “There is currently no product to protect national economies in this regard,” Douglas added.