Flood science specialist JBA Risk Management is pushing insurers to stress the impact of increasing climate change exposures and forecasts rises of up to 30% in annual average losses on UK residential property by 2040. The warning comes ahead of changing Prudential Regulatory Authority reporting requirements on insurers’ climate change resilience.
Nikki Chambers, technical director at JBA Risk Management, said: “The regulator has indicated that climate change impact analysis will become a mandatory requirement for all insurers in the not-too-distant future.
“In a 2020 Dear CEO letter, the PRA laid out the expectation that all firms should have embedded their approach to climate risk by the end of 2021, regardless of stress test participation, and the direction of travel is clear despite the cost implications for the smaller players.”
She added: “We already know from our flood model that for UK residential properties an increase of up to 30% in average annual loss is forecast by 2040, with strong regional differences, so the potential impact on insurers is clear.”
JBA Risk Management has developed a climate change analytics data suite that can be used with its existing UK climate change flood model.
Judith Ellison, modelling manager at JBA, commented: “The introduction of these reporting requirements is a complex and time-consuming task for the insurance market, but we have developed these tools in collaboration with insurers to support them in meeting their obligations in terms of flood risk, both now and in the future.”
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