Impact Of Environment Change On Insurance Companies Commerce Essay

Change in environment is growing up as a new type of concern in the security aspect because of the way it affects both the life and the well-being of human's in a highly interconnected and fragile world. (Evans, 1994, 107-128)

Changing climate is now a hazard to the basic welfare and survival needs of humans throughout the world, including the production of food, health, access to water and the use of land. Environmental deprivation rising from different kinds of inexpensive activities of humans has increased the power and occurrence of natural disasters across the world.

Around the world, there has been natural development in the elements and climate occurrences. Actually, the insurers have grown to be experts in modelling the devastating risks which has now become an included tool in the insurance industry. It has helped lots of businesses to process the loss from sudden natural disasters without important defaults. This has now led to the actual fact that insurance firms have become more enhanced in analyzing, handling and understanding their recent risks because of their natural disasters around the world. Lots of the companies in United Kingdom are found to be increasing in managing and examining their means of dealing with the future trends and dangers of the industry.

As a number of UK insurance companies have started to observe it, depending on their previous weather conditions and habits for planning out strategies for future. For this, they must identify the probability of losses and increases related to climate. The impact of climate change is on a very wide range between increased amount of hurricanes, fires and floods to health and life getting influenced by changing patterns of hot and winter. (Evans, 1994, 107-128)

Physical influences' effect on insurers:

Companies of insurance and reinsurance are likely to face the strong impact of the changes in weather more than other areas of the financial businesses. There are a variety of good examples where it sometimes appears that that how extremely the weather can affect the insurance firms, the federal government and the areas at backstops. Whilst there are types of the way the weather changes are impacting the insurance industry due to versatility of the insurance sector, in different ways it is quite well positioned in adapting the changes in weather occasions and habits. (David, 2007, 28-38)

Threat of environment change for insurance industry:

The main menace that is facing the insurance industry is climate change. This risk affects both property and casualty insurance that the insurance people. Another matter: both sectors must adapt to demographic change that is looming. This emerges from a report by Ernst & Young, in cooperation with Oxford Analytica. Ernst & Young has put together a high ten set of hazards that will confront insurers after interviewing twenty industry market leaders worldwide.

According to Ernst & Young, weather change tops the list because global warming is changing the weather and escalates the likelihood of promises due to floods, hurricanes and other natural phenomena. "I'm uncertain the industry is poised to handle local climate change, warned Tom Kornya, somebody at Ernst & Young, in an interview with Insurance Journal. Five years ago, this risk was not even on the list. "

Mr. Kornya adds that not only the sector of harm insurance that will be affected by climate change, life insurance should also package with it sooner or later.

Damage will come to insurance when weather change will cause blowing wind storms and floods. In life insurance coverage, the results will be steady. With temperatures which could change, life insurance providers will face new problems in health insurance and mortality. So there may be different types of loss. "The underwriting of the products is booming and nobody has yet assessed that cause environment change. The success of the industry will go through the development of progressive products, that may face great uncertainty, such as keying in speed and severity of weather change, "he said. The next risk that the industry faces is the demographic change with the introduction of the baby boomers retire, leading to new needs. Insurers would be under great pressure, they will need to replace government authorities. (Rober, 2010, 34-33)

In addition to the pressure produced by this new role, insurers will also package than their competitors. "Banks, mutual fund companies and everything finance institutions will battle to have the same dollar. There's a risk there too. Insurance companies must remain innovative with the products to keep the advantages, "says Kornya. (Rober, 2010, 34-33)

"The surroundings in which insurance providers and practice is constantly changing quickly, " said Tom Kornya. We find that individuals are looking for simple, low cost products and other people who want more technical products that are also more costly. A company that won't have a multichannel access could fall into the background if it generally does not use Internet, press and telephone. "The very last two risks on the set of the top ten risks of Ernst & Young are the legal uncertainties and the opportunity of geopolitical or macroeconomic disruptions. Inside the first circumstance, accountability and reform in terms of crime could lead to financial deficits. For the next, the company says that the threat of a severe financial meltdown scheduled to derivatives and hedge money could be damaging to the industry.

Opportunities for insurance:

Climate change reveals risks but also opportunities. The possible opportunities created by the effects of a changing climate may require nurturing through the determination of attention and resources. Too often, news coverage portrays environment change as a doom-and-gloom story of impending devastation. Certainly, lots of the possible impacts of local climate change are likely to negatively influence us, and we must addresses them, but we should not ignore the possible opportunities a changing climate could create partly by proactively adapting to them. Some economical industries and businesses may do better as a result of effects of climate change, and they should seek to identify those new financial opportunities and spend money on pursuing them. Turning back to the example the reduced reliance on winter roads due to warmer average temperature disrupts resource chains and boosts charges for the mining companies working in the region. (David, 2007, 28-38).

"It is a risk for insurance providers, but also a great opportunity, says Tom Kornya. There will be a great demand for pension products. Seniors look for low-cost products that make revenue. By negatives, issue the role of federal in the pension is not so advanced. Insurance providers will be required to take this place and this is a new risk to which they are unaccustomed. "

Financing and advisory

Companies in carbon-intensive sectors are already seeking money to help them decrease greenhouse gas emissions. In the public sphere, large sums of capital will be needed in the approaching decades to develop, enhance and renew key energy, travel and flood security infrastructure across the world. Climate change may appear to be always a slow burn concern for the financial sector, but companies would be wise to give it significant attention, just as much for the emerging upsides of changing demand as for protecting themselves against the erosion of value in the long run.

Hedging and trading

The demand from the industry is increasing for several risk transfer instruments in order to defend the companies against the increase in the costs of energy, the changing patterns of weather and the possible failing of current newly introduced solutions. The event of carbon on the list of goods that are tradable is continuing to grow higher to complicated products that are beginning to pull a big volume of financial organizations and invite some further violation and exploitation of the merchandise.

Consumer revenues

The awareness pass on about the renewable issues encourages expansion in socially dependable opportunities by the consumers and organizations equally. Even though, the marketplace for mortgages, insurance and lending options that give compensation to low carbon behavior is right now less, it may increase quickly. Likewise, the increased awareness of windstorms and floods has started to increase the desire of customers who are in risk for the property and casualty insurance.


There are a number of activities that the insurance industry can do in order to improve their knowledge of the impact and affects of change in climate, help the population and government to comprehend in an improved way and plan the risks involved in the development in fire-prone or seaside areas and make items which could protect their clients from the damage induced by the climatic change. Following are a few of the implications in order to reduce the negative impact of the climate change on the insurance industry: (Evans, 1994, 107-128)

Most of the climatic experts agree that the current weather conditions in future are likely to fluctuate that the previous weather conditions. Thus, it will be smart for the insurers to comprehend in a much better way, what will be the future if the predictions of the researchers are true. Risk models can be developed based on these predictions by using expertise. We are able to also put more potential for the research and studies as they'll provide more knowledge and analytical capacity. It will also help in allowing the insurance companies to find the hidden markets and new opportunities for his or her products combined with the risk management and educating consumers. (Rober, 2010, 34-33)

Work with the researchers in order to improve the financial relevancy and accurateness for the climatic change modeling.

Disclose and acknowledge the potential risks of climatic change in twelve-monthly security filings and by other business communications.

Should take a practical approach in order to influence the planning and development of land use, in fraction as the majority of the expected climb in the losses are stemming out from the disastrous events that could be prevented by good spatial planning. There are a number of steps that could be taken: 1) keep the valuable property out of the risk regions and 2) offer both the economic and environmental benefits.


Rober, D. , (2010), NAIC's Environment Dogma Is Putting Insurers at Risk, Country wide Underwriter / Property & Casualty Risk & Benefits Management, Pp. 34-33

Evans, S. , (1994), Recent climatic change and catastrophic geomorphic operations in mountain conditions, Geomorphology, Pp. 107-128

David, P. , (2007), Impact of Environment, Best's Review, Pp. 28-38

"the unpredictability of future weather brings significant dangers for insurance firms. ""The unpredictability of future climate brings significant opportunities for insurance companies"Consider the arguments for and from the above assertions. W



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