Climate change will lead to increased premiums, insurance companies warn
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The Government has been warned that climate change will lead to significant rises in the cost of home and commercial property insurance, as the current model for assessing flood risk is no longer workable.
Leading insurance companies have held a series of meetings with the Minister of State with responsibility for insurance, Jennifer Carroll MacNeill, amid concern over the rising cost of premiums and high payouts.
The has obtained briefing notes and minutes of meetings between Ms Carroll MacNeill and the insurance firms under the Freedom of Information Act.
In the meetings, insurers repeatedly raised concerns about the impact of climate change.
“Extreme weather events all over the world are impacting the ability of insurers in Ireland to write property insurance," a representative of AXA Ireland told the meeting.
Allianz Insurance said the industry will require assistance from the Government for climate-related events, as the current model for assessing flood risk is unsustainable.
The company also stressed the need for more cross-industry collaboration to address these issues.
AIG warned of a difficult market for insurers given the "increased frequency of mid-sized catastrophic weather events", with losses in the "region of €25-€70m" per event.
“As a result of this, AIG anticipates that the commercial property and general property market will see significant developments in terms of restricted capacity and enhanced pricing in the next renewal period," the minutes of the meetings read.
Peter Boland of the Alliance for Insurance Reform said the Government will have to plan ahead for sectors that may not get insurance cover in the years ahead.
"This may well become the case in Ireland, as it is in the UK, but not just for flood insurance, as insurers are jettisoning multiple sectors that they deem to be uncommercial, as the trend of micro-sectoring becomes more prevalent," he said.
RSA Insurance, meanwhile, predicted that rising reinsurance prices — the insurance price paid to cover insurance companies themselves — would also have to be passed onto customers.
“It identified the unstable geopolitical environment as a complicating factor and pointed out that there could be a global contraction of reinsurance capacity in 2023, which in turn would impact upon the cost and availability of cover here,” the minutes stated.
The impact of inflation and high payouts are also “holding back” efforts to reform insurance costs, the companies said, as they warned that prices are rising due to increased numbers of road crashes.
AIG said there had been a 4% increase in the price of motor insurance in February 2023 alone “due to inflation/cost of repair” after crashes.
“AIG also pointed out it has seen the frequency of motor incidents move up by approximately 30% from pre-pandemic levels and that there has been an increase in the severity of the damage in claims," the minutes revealed.
The company also expressed concern over the "involvement of solicitors” prolonging the claims-assessment process, and claimed that some legal firms do not use the Personal Injuries Assessment Board “under any circumstances”.
RSA told the minister that post-pandemic court delays and inflation were “holding back full implementation” of the Government’s reform agenda and that “it had concerns regarding the level of judicial awards it was seeing”.
The latest figures from the CSO show that while car insurance premiums have fallen 6% in the last year, home insurance has risen 17.9%, health insurance is up 1.5%, and travel insurance has climbed by 7.2%.
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