A Global Warning For Home Insurance 

Global Warming will have unprecedented repercussions on all facets of society. The insurance sector is another potential victim, especially the home insurance market with research suggesting that the current value of claims could double or even triple by the middle of the century.

The Association of British Insurers (ABI) is the latest high profile business to ring the proverbial gong to warn us that global warming is going to harm us in more ways than the odd winter storm or hot summer. Extreme weather is on the rise, the changes in climate in the UK for instance have become highly unpredictable. The Met Office has revealed that the past ten years have been the warmest since records began and that the number of winter storms in the UK has doubled over the last 50 years

One only has to look at the increasing number of incidents of flooding within the country to see that the warning bells are ringing with greater regularity. Each time there is a major flood, average premiums for buildings and home contents cover rises. Furthermore, it is not just flooding but severe gales that have been making the news headlines in the past few years. After such incidents there is always a surge in claims and after the event, insurance companies prepare to raise premiums again to counter the possibility of even more floods or gales in the year to come.

Worryingly for home owners, the insurance industry may be taking a more costly turn upwards to prepare for future escalations of bad weather. In the US for instance, Florida state officials are researching whether they should add a climate change component to an insurance hurricane risk model they have developed. Insurance companies there are working with meteorological agencies that forecast the risk of national disasters for the insurance industry, and are revamping computer models used to simulate weather trends. This of course will hit homeowners in the wallets and the UK may soon be adopting more sophisticated insurance forecast systems in the future which will raise premiums even further.

Indeed the crumbling home insurance sector in the US is the biggest indication of how other worldwide insurance providers will be hurt. After the 2004 Florida hurricanes, no less than seven private insurers stopped writing new homeowners policies or exited the market completely, even after they won substantial rate increases. In Texas, homeowners saw their premiums double after soaring water-related mold claims caused dozens of insurers to stop writing or renewing homeowner's policies.

The warning signs are already here then, and if climate change trends and insurance trends continue, it is likely that availability and affordability of insurance will be at even greater risk for homeowners and businesses.

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