Background. Wild fires. Wind storms. Floods. Drought. Rising sea levels. Hail and ice storms. Heat waves. Everyone, everywhere will feel the impacts of climate change. This makes them different from the risks traditionally covered by insurance, which are isolated events experienced by the few. The only certainty is the risk of cataclysmic losses will continue to grow exponentially over the coming years and it will no longer work to shift the burden of loss from those few that are affected to the many that could be.
Impact. We expect massive change in the insurance industry as a result of climate change, but one of the 2022 trends is an increase in climate change-related lawsuits against insurance brokers. Whether a dam bursts because of an event that was outside of historic norms, a forest fire consumes everything in its path or someone takes their own life out of despair for the future, brokers are left exposed to claims by those loss victims that say their broker failed to place adequate or appropriate cover.
Top tip. Brokers should follow best practices as independent professionals — for example, asking the right questions of the insured, understanding local risks, ensuring cover is with an appropriate insurer, and treating renewals with the critical eye of a new policy — all to meet the needs of an anticipated future, not historic norms. In addition, brokers need to document their policies and procedures related to climate change properly.
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