Insurance costs will rise for home and business insurances if Britain does nothing to prepare for the impact of climate change.
“The UK must start acting now to prepare for climate change. If we wait, it will be too late,” said John Krebs, chair of the Adaptation Sub-Committee on Climate Change, an independent body which advises the government on climate adaptation.
“If no action is taken, there will be very significiant costs on households and businesses and the UK will miss out on some business opportunities as well,” Krebs told reporters at a briefing.
The report was a “wake-up call,” and every part of society must think about the UK’s resilience to climate change, Environment Secretary Caroline Spelman said on Thursday.
“The transition to a low carbon, well-adapted global economy could create hundreds of thousands of sustainable green jobs. But we must — all of us — take steps now to recognize the problem, analyse the risk and plan ahead,” she said.
Cutting greenhouse gas emissions by 80 percent by 2050 from 1990 levels is essential but the UK also needs to adapt to ensure it is prepared for temperature increases, more intense rainfall and rising sea levels, the report said.
UK temperatures are already 1 degree centigrade higher than they were in the 1970s. Insured losses from weather-related events cost around 1.5 billion pounds ($2.33 billion) a year.
“By planning ahead and taking timely adaptation action, the UK could halve the costs and damages from moderate amounts of warming,” the report said.
The government needs to make sure adaptation is factored into land use planning, ensure national infrastructure and buildings can cope with rising temperatures, use water more efficiently and have an effective emergency planning strategy in place to cope with severe weather.
“My advice to the government is to look at incentives such as water metering,” Krebs said.
The government could also modify the objectives of regulators like Ofgem and Ofwat to ensure the sustainability of electricity and water use and supply, he added.
“We talked to Ofwat and they are aware of the issue but I still think their priority is to ensure the price remains low,” Krebs said.
Insurance can also serve as a price signal to drive action. However, insurance companies could go further to support property owners to improve the resilience of their homes, the report said.
“Some time in the next couple of years there will be a re-assessment by the insurance industry on the level of risk they are prepared to cover. If they change the assessment of what is an acceptable risk to them, that will drive people to take action (in a different way)” Krebs said.
UK businesses also need to include climate change in their risk assessments and, if necessary, in their corporate reporting, a separate report by the Confederation of British Industry (CBI) said. They should also be sharing non-commercially sensitive information so different sectors are consistent in their approach and can deliver cost savings.
