A new index to monitor the frequency of extreme climatic phenomena points to an increase in insurance premiums. (Provided: Scott Barker)
Homeowners and residential real estate companies are likely to face higher insurance premiums after a new actuarial index has warned about rising financial risks due to extreme weather events.
- Climate index to be updated every season
- Developed with regulators and scientists of natural risk that use national data
- The potential loss of coastal erosion estimated at the value of 88,000 million dollars, excluding the value of land
The weather index Australian Actuaries record risk factors such as high levels of the sea, droughts, forest fires, cyclones, floods and extreme temperatures as more frequent as growing evidence of climate change supports.
The index, developed by the chief actuary and director of Finity Consulting Tim Andrew, notes the frequency of extreme conditions this fall was greater than the historical extremes in the fall between 1981 and 2010.
"It's fair to say that this is a fairly new area for everyone and you can imagine that insurers in particular are worried because they have to collect appropriate prizes for the risk they are taking," said Mr. Andrew to the AB's AB program.
"The index clearly shows that we have an increase in the frequency of extreme events. And it would be expected that over time, many people who are in flood-prone areas face increasing prizes.
"One of the challenges for us is to make sure that we are building properties in the right places to make sure we minimize the impact in the future."
The Australian Prudential Regulation Authority (APRA), which oversees banks and insurers, warned last year that the risks of climate change were "predictable, materials and actions."
APRA executive Geoff Summerhayes said the index was an important step towards a cross industry standard to spread risks from extreme weather events and implications for businesses, consumers, developers and governments.
"We believe that this initiative is a positive step in helping regulated entities understand and manage the potential impact of climate risk on their companies," said Mr. Summerhayes.
The new climate index has been developed to help companies and regulators control climate risk. (Provided by: Cate White)
The index – which will be updated every quarter and will be supported by the Meteorology Office and CSIRO – is built on similar indexes that are currently used in Canada and the United States.
The executive director of the Actuaries Institute, Elayne Grace, said the index was a "first step" because the actuaries developed more explicit measures of climatic risk.
"We hope to build this index by associating risk data, such as property damage and health statistics, to understand the relationship between weather extremities and risk, allowing for more explicit risk indices," said Grace.
The index adds to the worries about the future losses of climate change after the Climate Institute had warned in 2016 that the potential damage to coastal erosion is estimated at $ 88,000 million, excluding the value of land.
The index was developed in consultation with regulators and scientists of natural risk with data collected at national level and grouped in twelve similar climatic reasons.
Tim Andrews is anxious to stay away from the policies surrounding cynicism about climate change, but hopes that the shift towards greater awareness will not be obscured by the cynics of climate change.
"This is inevitably a risk to these problems. I am often disappointed with politics and I am hoping that this message will not get lost."
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