Insuring Tomorrow: Insuring Against Climate Change

The harrowing effects of climate change are only becoming more pervasive as sea levels rise and temperatures soar, causing heavy rainfall, stronger storms, and severe droughts. According to the National Oceanic Atmosphere Administration, the annual average for natural disasters between 1980 and 2022 was just 8.1 events. But the first two months of 2023 alone saw 22 significant natural disasters (Global Disaster Alert and Coordination System). By 2030, the United Nations predicts that more than 500 disasters will be experienced annually around the globe.

This means an increased demand for new insurance products and comprehensive coverage over the next decade. A rise in parametric insurance products is one shift we can expect. These products pay out a predetermined amount when certain conditions are met, such as certain wind speed levels or rainfall, making them useful in extreme weather conditions. Disaster relief insurance is also set to boom, with insurers providing more coverage to individuals and businesses needing immediate assistance in the form of cash payments, temporary housing, and food assistance when disaster strikes.

Covering the costs of defending lawsuits related to climate change and any damages awarded, change liability insurance products are expected to rise to protect businesses and governments from legal claims related to climate change. Climate resilience insurance will also provide more coverage for companies and governments that have taken measures to adapt to climate change, such as the building of flood-resistant infrastructure, developing drought-resistant crops, and implementing energy-efficient technologies.