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Market Update
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Lloyd's - International
Printable Version
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The world’s climate is rapidly changing. Scientists now agree that climate
change is a reality and has the potential to change the world we live in, beyond
recognition. One of the most serious consequences of climate change is rising
sea levels—in fact, sea levels are rising ten times faster than a century ago.
According to Lloyd’s 2006 report, due to rapid climate change, average global
sea levels could rise between 22 and 34 centimeters by 2080. On top of this,
over half the world’s population is predicted to live within 62 miles of the coast
within 25 years. This means that over 200 million people could be directly
affected by the rise of sea levels within the span of our lifetimes.
Lloyd’s, in collaboration with leading risk management company Risk
Management Solutions (RMS), have carried out a piece of research looking at
fl ooding in coastal regions as a result of sea levels rising. The research looks at
a standard property in four generic locations across the globe: A tropical island,
a defended and undefended location in Northern Europe, and a coastal city in
Southeast Asia, and ways in which adaptation can protect against flood damage.
The research shows that with an effective adaptation strategy, future losses
could be reduced to below present-day levels, and losses for high-risk properties
reduced by as much as 70 percent. A 12 inch rise in sea level by the 2030s could
double insured losses for a high-risk coastal property, if no changes are made.
Adaptation methods looked at in the report include: Raising houses on stilts to
avoid flood water, reinforced cladding, fl ood walls, and dry flood-proofing.
The report highlights the role that the insurance industry can play in promoting change by encouraging policy holders to adapt
their properties. With adaptation, insurers will be able to provide coverage for longer, and at a lower price. Risk-based pricing
is vital, as underlined in the report, as it will create an incentive for policy holders to reduce the risk to which their property is
exposed.
The world cannot insure its way out of climate change; however, insurance is an effective way of managing individual risk that
cannot be dealt with by adaptation.
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Please contact your Lockton Representative for further information regarding any information contained in this
market update.
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Anna Bussell
Communications Executive,
Lloyd’s
London, U.K.
Tel: 011 44.20.7327.6256
E-mail: anna.bussell@lloyds.com |
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