Climate Change is a state of circumstances that has been expected and now developing, demonstrating its often devastating repercussions worldwide.
We do now have records of extreme weather phenomena all over the world, and, in Cyprus, we have noted some isolated events, which however were severe enough to cause huge losses and damages, even in the brief period they lasted. Examples were a cyclone in the Limassol area in February 2024 and a short but extreme hailstorm in March 2024.
In October this year, extreme weather conditions lasting only a few hours, led to phenomena such as falling trees in the roads and on properties, because of a tempest (strong winds the level of which have hardly ever been recorded on the island) and very strong and dangerous storms, causing damages to homes and other premises, and leading the Ministry of Interior to move to an assessment and loss evaluation and prepare a compensation scheme, as they did last spring.
On 10th November this year, we have seen almost the whole range of weather-related phenomena, from storm, tempest and flood, to a waterspout, even fire caused by lighting. The full financial effect of losses and damages incurred, and compensation to be remitted, is a long way from being calculated.
So – how would an average person who is prudent and has taken out an insurance policy covering their property against what we call “wet perils” be practically or monetarily affected by this wide-scale international environmental change?
There are two important aspects in tackling this issue and guiding the client –
1.Will there be an increase in my insurance premiums?
It is a known fact that local insurance companies are supported by reinsurance companies, through reinsurance arrangements ensuring that there is capital available to remit large amounts in the event of large losses. The good news is- wise local insurance companies choose to collaborate with the best reinsurance companies, those with high ratings, a good continental presence and an impeccable reputation. The bad news is, that these companies are part of conglomerate groups – meaning they are affected financially by any catastrophic event occurring around the world. In the recent Baden-Baden Reinsurance Conference (meeting place for leading reinsurers to exchange views), Leopoldo Camera (Head of P&C reinsurance for Europe at Swiss Re), stated in his speech “The challenge of extreme weather events is huge, and it’s not one that only one element in the value chain of the insurance industry can solve alone.” The global situation is more volatile than it was a year ago,” he said. “Europe is experiencing its fair share of extreme weather events,” he added, pointing out the significant damage caused by recent storms. Reflecting on Swiss Re’s efforts to address the rising severity of these catastrophes, Camara emphasised the need for collaboration across the entire insurance ecosystem. “The industry is adapting very quickly,” he stated. “Reinsurers, insurers, brokers, governments and capital markets needs to come together”, he said.
The above might mean nothing to the average insured, but it does mean everything to a local insurance company – a company collaborating with Swiss Re and other reinsurers of similar status. They are telling us we must come together – Europe has had a lot of storms, Cyprus is in Europe, so it is part of of all those players coming together. Professionals reading between the lines know – reinsurance costs shall increase. Unfortunately, increasing reinsurance premiums will impact local premiums on these kind of risks. Eventually, if not right away, we shall see increased premiums for covers relating to storm, tempest, flood and related natural catastrophes, for homes, and all premises and properties. It is an inevitable outcome of Climate Change. As dangers are constantly looming, risks are greater and inevitably premiums are higher.
At the same conference, Da Victoria Lobo (head of P&C for Europe, Africa and Middle East) highlighted the shift in the catastrophe loss landscape in recent years, with secondary perils such as floods, severe convective storms increasingly driving industry losses. She stated: “Our industry is not just about paying for losses, but also about educating people on how to reduce them.”
We found her statement very interesting so –
2. How can I reduce or mitigate my losses that are attributed to climate change?
- We assume you have an insurance policy covering your home or business or any property. If you do not, it is imperative you have one. If you do- read it through and check in detail what it covers – in terms of weather. There is storm, flood, tempest, cyclone, hurricane – and hailstorm, not often cited, but usually included under storm. Look at your Insured Sum. Does it reflect the value of your property?
- Take extra care of your property located out in the open – obviously more prone to loss and damage in the event of severely bad weather. Check if your Policy includes cover for your property outside, and if the Sum Insured is the right one.
- Imagine the worst-case scenario – a cyclone knocking down all of your property. You would be paid your Sum Insured. Would that amount be enough to rebuild it? Now imagine a very possible scenario – a storm damaging some of your property, especially that located outdoors, as it is the most vulnerable. Check your Insured Sums – check the value of what you have stored outside – if you have losses inside or outside, the compensation you will receive will be proportional to the Sum Insured you declared, for your Building and your Contents. Make sure you are not under-insured!
- Take measures to protect your own property so that you don’t even have to go to your insurance company. Check your insulation on your roof. Have it maintained regularly. It will make a difference, if you do not have rain spilling into the house and ruining structures. Check your drainpipes and any gutters around your property, make sure there are no blockages – you want to make sure that rain water runs through and spills out instead of making a home inside your walls and gradually creating mucus, rot and mildew (excluded from every Insurance Policy)
- You have a car – a hailstorm might last only for half an hour, but – it’s like little bullets hitting your vehicle. Hope you are not driving, hope you can go home and park it safe inside a closed garage. During a hailstorm – it is difficult to drive, no adequate visibility, increased danger of a road accident. So – if there is a warning, do not drive unless absolutely necessary. Not everything is insurance-related. Your and your family’s safety are more important than anything.
And final thoughts – Climate Change has been attributed, to an extent, to our irresponsible stance towards the planet. Climate is closely linked to our environment, and experts are saying we don’t care enough about our common home. Official name is the “human footprint” adding up to the “carbon footprint” – an important contribution to Climate Change.
3. What can I do to mitigate the effects of Climate Change in my area?
- Reduce, repair, reuse, recycle
- Use public transport, walk or cycle as much as you can, instead of driving
- Save energy at home, use electrical appliances only when necessary
- Change your home energy source – look into other options apart from electricity
- Don’t throw food away
- Eat more vegetables rather than processed food
- Consider switching to an electric vehicle (you will paying a higher premium but doing your part for saving our planet)