Insurance premiums to become more common weather conditions become more common

Updated

November 08, 2018 11:16:28

Residential property owners and businesses are likely to face higher insurance premiums after a new actuarial index.

The Australian Actuaries Climate Index tracks risk factors such as elevated sea levels, drought, bushfires, cyclones, flooding and extreme temperatures.

The index, developed by leading actuary, and Principal Finistic Consulting Tim Andrew, 1981, 2010.

"It's fair to say this is a pretty new area for everyone and you can imagine they're paying attention to the premiums for the risk that they're taking on," Mr Andrew told ABC's AM program.

"The index is clearly showing that we are expecting a lot of money and we would like to see that many people in the bushfire and flood-prone regions are facing some increases in premiums.

"One of the challenges for us is to make sure we're building properties in the right places to make sure we minimize the impact in future."

The Australian Prudential Regulation Authority (APRA), which oversees banks and insurers, warned last year that the risks of climate change were "predictable, material and actionable".

APRA executive Geoff Summerhayes said the index is an important step towards a cross-industry standard for the disclosure of extreme weather events and the implications for business, consumers, developers and governments.

"We believe this initiative is a positive step towards helping to regulate and understand the potential impact of climate risk on their businesses," Mr Summerhayes said.

The index – which will be updated by the Bureau of Meteorology and the CSIRO – builds on similar indexes currently used in Canada and the United States.

Actuaries Institute chief executive Elayne Grace said the index was a "first step" as actuaries develop more explicit measures of climate risk.

"We hope to build this relationship by attaching risk data, in order to understand the relationship between extreme weather and risk," Ms Grace said.

The index adds to concerns about future losses from climate change in the United States, which is estimated at $ 88 billion excluding the value of the land.

The index has been developed with the help of natural data collectors and data collectors.

Tim Andrews is keen to stay away from the politics of cynicism and will not be overshadowed by climate change cynics.

"That's inevitably a risk with these issues I'm often disappointed by the politics and I'm hoping this message does not get lost."

topics:

business-economics-and-finance

insurance,

climate-change,

australia

First posted

November 08, 2018 10:42:08