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The uninsurable world: how the market fell behind on climate change

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By illuminem briefings

· 2 min read

illuminem summarizes for you the essential news of the day. Read the full piece on Financial Times or enjoy below:

🗞️ Driving the news: Half a century ago, Munich Re highlighted the need to study climate variations and their impact on risks
• Today, climate change's role in fuelling natural catastrophes is undeniable, causing a property insurance crisis
• Insurers are grappling with four consecutive years of $100bn+ losses from natural catastrophes

🔭 The context: Munich Re's 1970s paper warned about global warming and polar melt
• Insurance models have struggled to adapt to the surge in extreme weather events
• State Farm and other insurers have paused new business in high-risk areas like California

🌍 Why it matters for the planet: Accurate insurance models are crucial for managing risks from climate-induced events
• Delayed adaptation hampers effective response to floods, wildfires, and other disasters
• Improving models can lead to better risk management and resilience planning

⏭️ What's next: Insurers are investing in new tools to better predict and manage climate risks
• Industry experts call for integrating long-term climate risks into underwriting models
• Continued dialogue between scientists and insurers is needed to improve risk assessments

💬 One quote: "Very clearly the [insurance industry’s] models are not working" (Lindsay Keenan, EU co-ordinator at Insure Our Future)

📈 One stat: In 2023, there were a record-breaking 37 separate natural events costing at least $1bn each

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