World economy facing 15b bill from climate change

Jun 30 2005 by Nic Paton Print This Article

Climate change in the form of ever more frequent and ferocious storms is likely to cost the global economy 15 billion a year, insurers have estimated.

The calculation by the Association of British Insurers has been based on international scientific research, and predicted the costs of mopping up after major storms are likely to increase by as much as two thirds.

ABI director of general insurance Nick Starling said businesses and governments needed to be looking closely at how they managed the effects of climate change, of which insurance would be a key issue.

"Governments now have a chance to make rational choices for the future, before it is too late. Making the right decisions based on first class assessment of the financial costs of climate change will ensure lower costs for the public in future," he said.

Taking action to reduce carbon emissions could cut the 15 billion bill by 80 per cent, he added.

Other actions such as improving coastal defences and inland flood protection would also help, as would changing building codes to ensure premises are more weather-resilient.

By 2080, the cost of insured damage in a severe hurricane season in the U.S could rise by three-quarters, to 82 billion, it predicted.

This was an increase equivalent to almost three Hurricane Andrews, the 1992 storm that was the world's costliest single weather event recorded to date.

The costs of Japanese typhoons could increase by around two-thirds to reach 19 billion, it added, or double the cost of typhoon damage in 2004, which was the costliest year in the past 100 years.

Similarly, the financial costs from flooding could rise in both the UK and the rest of Europe, increasing the annual flood bill by up to 82 billion across Europe.

But by acting now to reduce global carbon emissions, the bill from hurricanes, typhoons and windstorms could be reduced by more than 33 billion by 2080, the ABI added.

Stronger,better-enforced building codes could prevent and reduce windstorm damage by 10 per cent just in the south east of England.

Improved coastal defences could reduce the global annual damage from a 0.5m rise in sea level by up to 16 billion.

And effective flood management in the UK could cut damage costs here by 80 per cent, it predicted.

Margaret Beckett, Secretary of State for Environment, Food & Rural Affairs, agreed business had a vital role to play in tackling climate change.

"This report brings the financial risks of climate change into sharper focus. In some countries and some sectors, climate change will bring positive as well as negative impacts agriculture in the UK is a case in point," she said.

"But even in the face of some opportunities the expected costs of damage from climate-related events will still be high, and increasing. For some sectors, damage costs could be dangerously high. "Set against the picture of spiralling costs, though, is the evidence that cutting emissions can avoid the greatest predicted damage costs and most of the premium increases. And it is by averting dangerous climate change altogether that we can best protect people and livelihoods from climate risks," she added.