Rising sea levels and changing weather patterns could mean a doubling of insurance losses for properties in coastal areas by 2030 unless high-risk areas adapt by implementing aggressive mitigation measures, a new study by Lloyd's and Risk Management Solutions warns.
"Our work over the last three years supports the view that rising sea levels is absolutely one of the most important consequences of climate change," said Lloyd's Chief Executive Officer Richard Ward. He emphasized that rising sea levels need to be "taken very seriously" by society and the insurance industry.
Mr. Ward said that although reduction of greenhouse gases is the only long-term solution to the problem, "in the short- to medium term, there are other things that we must do," citing "adaptation" as a key philosophy going forward.
Adaptation options, the Lloyd's-RMS study suggests, include flood defenses such as dykes and sea walls, moving building contents out of reach of flood waters, reinforcing building exteriors, moving or raising structures to avoid flood damage, and protecting external electrical and mechanical equipment.
In its fourth 360 Climate Change Project–"Coastal Communities and Climate Change"–Lloyd's, together with risk-modeler RMS, said at a press conference here that some models predict an ice-free Arctic by 2100.
"If people ignore this, then ultimately insured losses will increase significantly, and insurers might start withdrawing coverage–that's going to be the ultimate consequence if people don't take notice," Mr. Ward told National Underwriter.
He continued that most of all, governments need to "sit up and take notice. States need to sit up and take notice. They need to let the market operate, they need to let the market generate the right economic indicators to incentivise the appropriate behavior."
He added that "once you start subsidizing things and you interfere with the operation of the market, then you send out the wrong signals and encourage the wrong behavior," noting that in Florida, in particular, large properties are being built that "clearly cannot withstand the sort of catastrophes that are now facing the U.S."
At risk from rising sea levels are major cities including Miami, New York, Mumbai, Shanghai and London, the study noted. What's more, the report said about half the total population exposed to coastal flooding resides in just 10 cities, with more than half the world's population set to live in coastal regions in the next 25 years.
Mr. Ward appealed to the insurance industry, which he said can play a key role in encouraging adaptation by policyholders through incentives offered. Without adaptations, he said losses could double.
"We can't insure our way out of climate change," he said, "but we certainly can get society to think about the results of climate change and the need for adaptation."
RMS CEO Hemant Shah warned that rising sea levels will bring more frequent and intense weather events. He said adaptation plans need to be in the works, beginning today.
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