Climate Change Poses Risks, Advantages to Insurers, Zurich Says

By Alex Morales

Oct. 23 (Bloomberg) -- Climate change poses risks to insurers as economic losses from weather-related disasters have risen 2 percent a year since 1970. Insurers, though, can turn global warming to their advantage, Zurich Financial Services AG said.

Warming weather raises flood dangers and the frequency and severity of catastrophes such as hurricanes, Zurich's Australian unit said today in a report. Rather than drop coverage of those at risk, insurance companies should help clients adapt, it said.

Insurers able to boost customer resilience to climate-change hazards may see ``reductions to property damage and insured losses while sustaining and even enhancing premium income,'' Zurich Australia Chief Executive Officer David Smith said in a statement.

The $4 trillion insurance industry is ``society's shock absorber for risk,'' the Zurich-based company said, with profitability a vital part of the health of the world's economy.

``2008 will be remembered as the year the global economy and markets had a roller-coaster ride,'' Smith said. ``But this does not make the issues of climate change redundant. If anything, it emphasizes that insurers need to factor the impact of climate change into their bottom line alongside the issues of the global economic meltdown.''

Insurers could benefit from entering new markets, such as providing coverage for projects that generate carbon credits, or permits to emit greenhouse gases, Zurich's report said.

Insurers should also reward clients who slash their greenhouse gas emissions and make buildings more resilient to storm damage, Switzerland's largest insurance company said. They can also sell climate risk-modeling services to generate more income, it said.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.