Nov. 18 (Bloomberg) -- Extreme-weather events may become more common as global warming changes atmospheric conditions, encouraging insurers to raise rates and enter new markets.
Hot days will become more severe and frequent, according to a report published today by the Intergovernmental Panel on Climate Change. Heavy precipitation and the wind speed of tropical cyclones will also increase, according to the panel, a United Nations-endorsed group with 194 countries as members.
“If the underlying risk increases then the price of that insurance or reinsurance policy is likely to increase,” Mark Way, a senior vice president at Swiss Re Ltd., said in a conference call after the report was released. “The insurance sector is heavily exposed to climate change.”
U.S. insurers increased commercial rates 1.5 percent in the second quarter, a move that was “likely influenced by catastrophes,” according to a statement from consulting firm Towers Watson & Co. Swiss Re is expanding its micro-insurance business in developing countries as changing weather patterns fuel demand, Way said.
“Insurance is basically designed to extract risk from people’s lives which they are not able to or not willing to deal with themselves,” he said. “By providing that kind of insurance protection to people you can stabilize their lives and their livelihood.”
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