A new index that tracks the frequency of extreme climate events points to rising insurance premiums. (Delivered: Scott Barker)
Homeowners and companies are likely to meet higher insurance premiums after a new actuarial index warned of increasing financial risks from extreme weather conditions.
- Climate index is updated every season
- Developed with regulatory authorities and science scientists using national tasks
- Potential losses from coastal erosion alone are estimated at $ 88 billion, excluding land value
The Australian Actuaries Climate Index tracks risk factors such as elevated sea levels, droughts, bush fires, cyclones, floods and extreme temperatures, more often as growing evidence of climate change.
The index, developed by leading actuary and Finity Consulting, chief executive Tim Andrew, warns the frequency of extreme conditions this autumn being higher than historical extremes between autumn 1981 and 2010.
"It's fair to say that this is a fairly new area for everyone and you can imagine that insurers are particularly worried that they have to take out sufficient prizes for the risk they take on," Andrew told ABC's AM programs.
"The index clearly shows that we have increased the frequency of extreme events. And one would expect over time that many people in bushfires and flooded areas would face some premium increases.
"One of the challenges for us is to make sure we build real estate in the right places to minimize future impact."
Australia's supervisory authority (APRA), which oversees banks and insurance companies, warned last year that the risks of climate change were "predictable, material and feasible."
APRA Managing Director Geoff Summerhayes said the index was an important step towards an industry-wide standard to reveal the risks of extreme weather events and the consequences for businesses, consumers, developers and governments.
"We believe this initiative is a positive step towards helping regulated entities understand and deal with the potential impacts of climate risk on their businesses," said Summerhayes.
The new climate index has been developed to help companies and regulators deal with climate risk. (Delivered: Cate White)
The index – updated quarterly and supported by the Bureau of Meteorology and CSIRO – is based on similar indexes currently used in Canada and the United States.
Elayne Grace, Executive Vice President, said the index was a "first step" because actuaries developed clearer climate risk mitigation measures.
"We hope to build on this index by attaching risk data, such as property damage and health statistics, to understand the relationship between weather and risk, so that more clear risk index can develop," Grace said.
The index adds concern about future climate change losses after the Climate Institute warned in 2016 that the potential damage from coastal erosion was estimated at $ 88 billion excluding the country's value.
The index was developed in consultation with regulatory authorities and conservationists with data collected nationally and grouped for twelve climatic similar reasons.
Tim Andrews is keen to abandon the policy of cynicism on climate change, but hopes that the transition to increased awareness will not be overlooked by climate change cynics.
"There is inevitably a risk of these problems. I'm often disappointed with the policy and I hope this message will not get lost."