The climate change challenge facing insurers was starkly highlighted yesterday with the release of new data revealing extreme weather events cost insurers more than $25bn in claims last year.
Insurers paid out $27bn for natural disaster-related claims during 2015 according to reinsurers Munich Re, with 94 per cent of the claims made for damage caused by extreme weather events such as hurricanes, floods and storms.
Although losses were lower than previous years - thanks to greater climate resilience, fewer cyclones in densely populated areas, and the strong El Niño phase reducing the incidence of North Atlantic storms - storms and floods still caused billions of dollars of damage.
The reinsurer also warned that despite lower losses this year 2016 could prove costly, as El Nino may be followed by La Niña, which could bring drought to parts of the US and heavy rains in Indonesia and Australia in the latter half of the year.
In developing countries in particular, only a fraction of the overall loss is insured - meaning that the total losses felt by affected countries is many times larger than the claim made to insurers.
Munich Re said it is developing strategies to help those in developing countries cope with more extreme climate-related events, such as creating insurance pools which allows insurers to spread the risk of cover in high-risk regions.
The data also revealed the scale of the damage wrought by the recent flooding across the UK.
Costly repair work in Yorkshire after the flooding caused by Storm Eva could amount to "well over" €1bn, while the floods from Storm Desmond that hit England and Scandanavia are likely to cost insurers $1.5bn, Munich Re said. Last month leading accountants KPMG warned that the cost of the UK winter floods could top £5bn, with around £1bn of costs impacting families and businesses with no or inadequate insurance.
Munich Re also became the latest organisation to link the UK floods to climate change, suggesting the extreme rainfall seen over the past several weeks is a result of changes in the jet stream - a sign of warming in the Arctic regions caused by climate change.
The report came on the same day as the Met Office confirmed December 2015 was the wettest month on record and the warmest December ever recorded. Rainfall was almost double average levels, while the average temperature of 7.9C was 4.1C above the long-term average.
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