The insurance industry must face up to the growing threat of climate change or risk financial ruin, according to Lloyd's.

A new report from the London-based insurance market warns that insurers must act now to understand and actively manage risks from emerging threats such as greenhouse gases and rising sea levels.

“Although it's almost two decades since the UN recognized that climate change was a catastrophic threat to earth, it's clear that the insurance industry has not taken catastrophe trends seriously enough,” said Rolf Tolle, Lloyd's director of franchise performance.

With recent scientific evidence suggesting that climate change is happening faster than previously thought, investment in research and a change in industry behavior is long overdue.

Key findings of the report include:

o Recent natural disasters have revealed the inadequacy of capital and pricing models, so catastrophe models must be updated regularly to keep pace with the latest scientific evidence.

o The industry must take a new approach to underwriting, looking ahead and factoring in climate change scenarios, rather than simply basing decisions on historical records–especially with extreme windstorm seasons set to continue.

o Insurers must prepare for the impact of climate change on asset values and regularly review and communicate conditions of coverage in light of the impact of climate change.

The report marks the launch of Lloyd's 360 Risk Project which aims to generate debate about today's key risk issues and how best to manage them.

Special Reports /

Insurers Must Heed Global Warming Menace

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