UN Climate Report’s Warnings Compound Worries in Insurance World
A UN climate change report’s warnings are compounding alarm in the insurance industry and companies that pay premiums, as they eye increased risks from more frequent and more severe storms, wildfires, droughts, and rising sea levels threatening coastal cities.
The Intergovermental Panel on Climate Change report—which United Nations Secretary General Antonio Guterres branded a “code red for humanity"—only worsens fears of increasingly costly payouts for the insurance industry and concern that companies faced with pared-back coverage will opt to go without.
Companies have few easy options today, said Jared Zola, a partner in Blank Rome’s policyholder-only insurance recovery practice. Wildfires, mudslides, and hurricanes particularly in 2017 and 2018 and the big payouts from insurers triggered big “portfolio-wide adjustments” as insurers increased rates and trimmed policy language on what could be covered.
“This has really made companies prioritize what is most important to them,” he said.
“If the business is thriving, the vast majority of its revenues come from its customers or suppliers,” so companies will often prioritize insurance covering business interruptions over blanket coverage of buildings and property, Zola said. He is seeing companies “drawing a line in the sand” on such coverage, essentially self-insuring risks to properties.
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“UN Climate Report’s Warnings Compound Worries in Insurance World,” by Dean Scott, was published in Bloomberg Law on August 16, 2021.