Over one-third of the insured losses in the last 20 years, a staggering figure of 567 billion euros, can be attributed to climate change. Insurance costs are rising, and the sector is going through a period of crisis. To understand the reasons behind this, one must look at climate change: “The current insurance crisis is a result of yesterday’s climate inaction.”
This is the central message of the new report by Insure Our Future, a global campaign led by NGOs and social movements to push the insurance sector to do its part in addressing the climate crisis.
The Role of Insurance Companies
Climate change is having an increasing economic impact, yet insurance companies continue to play a contradictory role. While some raise premiums or cancel coverage, they continue to support fossil fuels, worsening the climate crisis.
There are a few virtuous cases, such as the Italian company Generali. Last October, the company “set a new standard” by adopting the first fossil fuel restriction policy covering the entire oil and gas supply chain, including new LNG projects.
Why Are Insurance Costs Still Rising?
However, the sector as a whole has slowed down any truly effective actions on climate, the report claims. And now it finds itself at a crossroads: estimated climate-related losses already exceed the premiums that insurance companies collect from coal, oil, and gas for 15 of the largest insurance companies.
While the overall market for fossil fuel commercial insurance has grown marginally in the last two years, total premiums for renewable energy insurance are still less than 30% of the size of the fossil fuel insurance market. We’re talking about $6.5 billion versus $22 billion.
Meanwhile, the share of insured losses attributed to climate change has increased on average from 31% to 38% over the past decade. And the annual growth of these damages (6.5%) has significantly outpaced the growth of total insured losses (4.9%). In 2022, the last year for which consolidated data is available, $52 billion of the total $132 billion in damages were attributed to climate.
“Because these rising costs are making insurance unaffordable for many communities, rapid decarbonization is essential to control inflationary pressures on premiums, increase access to and affordability of insurance, and protect the most vulnerable people,” states Insure Our Future.