The insurance industry will have to hold more capital under Solvency II because of climate change, new research has revealed. A new Association of British Insurers report, "The Financial Risks of Climate Change", is providing some quantification of the new extra capital required, noting this could mean insurers have less capacity. The ABI has found that it could mean that insurers have less cash to invest, with significant impact on capital flows. In the underlying research conducted by AIR Worldwide Corp and the Met Office, climate models have been linked with industry catastrophe models to predict the financial cost to insurers of future climate change risk. The report said that Solvency II's 99.5 per cent requirement that a company should remain solvent for the coming 12 months justifies using the 200-year-loss to represent required minimum capital for the purposes of a sensitivity study.
According to the findings, assuming a global temperature rise of four per cent, a further £1.9bn
This article is only available in full to Complinet Complete UK and Europe Subscribers who are logged in.
Please log in to see if you can view this content.
