Brought to you by:
Premium Funding
Premium Funding

Actuaries hold key climate change role

Facebook Twitter LinkedIn Google

Actuaries have a vital role to play in analysing the potential effects of climate change on insurance in Australia, according to research presented to an industry conference.

The threat of cyclones moving further south and multiple bushfires happening simultaneously in different states are among key issues, Taylor Fry Consulting Actuary Sharanjit Paddam, one of the report’s authors, told insuranceNEWS.com.au.

“We don’t have to be experts in climate science but we do have to then translate that climate science into what that means for risk and what that means for premium and capital for insurers,” he said.

The report by Mr Paddam, Jon Harwood and Jessica Egan and University of NSW climate science professor Andy Pitman was presented to the Actuaries Institute General Insurance Seminar.

Mr Paddam says climate scientists expect cyclones will occur further south, possibly affecting heavily populated areas along the east coast.

Climate change will have an uneven impact on premiums and potentially exacerbate affordability issues as insurers price more precisely for individual locations.

“There will be small sections of the community who will be exposed to high natural hazards risk and will consequently experience significant increases in the cost of insurance,” the report says.

The actuaries also warn of reputational issues for insurers if premiums are considered unaffordable.

“Hence it is in insurers’ interests to address affordability in order to avoid adverse publicity and mitigate any reputational risks. Further, insurers want to maintain a strong relationship with the community so the industry is given permission to write business.”