I work for a major insurer. Much of my industry is fudging the numbers in the face of the climate crisis
Insurers are taking on more risk than they should. If – or when – a major disaster hits, the catastrophe will have far-reaching consequences
TL;DR
- The insurance industry is facing increasing risks from extreme weather events due to climate change.
- There is pressure on risk modellers to lower loss forecasts to make insurance more affordable and competitive.
- This leads to underpricing of risk and taking on more exposure than appropriate.
- Insurers may exclude certain climate-related risks from policies, leaving customers unprotected.
- The industry's underestimation of risk could lead to widespread financial instability if major disasters occur.
- Customers are unaware of the increased risks and the potential for their homes to become uninsurable.
- The writer feels that modellers and researchers are seen as an inconvenience rather than an essential part of risk management.