Financial Adaptation Challenges for the Insurance Industry due to Climate Change

Climate change increases the risk of extreme weather patterns. Natural disasters such as floods, cyclones, storms, droughts and rising sea levels result in damage to property, business and economies. Historically people who have suffered loss have relied upon insurance for financial support. However climate change will introduce an era of instability - can insurance companies offer innovative solutions to a crisis as they have done in the past? This paper looks at strategic responses from the insurance industry to climate change risks. The paper argues that the current methods of calculations and instruments are redundant and insurance companies now need to prepare not only themselves but also the general public and the government for an environment in which there are heightened risks. New methodologies need to be developed sooner rather than later in the context of adaptation to the risks and realities of fighting climate change