Insurers warned on climate change

Insurers had to pay out huge sums after Hurricane Katrina

Insurance firms could become "extinct" unless they address the threats posed to their business by climate change, Lloyd's of London has said.

Rolf Tolle, a senior executive at the global insurance market, said insurers needed to manage the threat posed by greenhouse gases and rising sea levels.

His comments came as Lloyd's released a report warning of serious consequences if environmental pressures are ignored.

"A change in industry behaviour is long overdue," the report stressed.

Reassessment

According to the report - Climate Change, Adapt or Bust - the industry's pricing models are inadequate and catastrophe models must be updated to factor in the latest scientific evidence regarding climate change.

It recommended that the industry should adopt a new approach to underwriting by factoring in current and future climate change scenarios, rather than simply basing figures on historical records.

We all need to play our part in adapting to climate change Vincent de Rivaz, EDF chief executive

In view of the huge impact of climate change, it said, insurers should also reassess what should be covered.

Mr Tolle, Lloyd's franchise performance director, said cooperation with business and governments was the key to containing risk.

The report's publication coincided with new analysis by the Met Office on the impact of climate change on energy firms.

The report - backed by leading energy companies EDF, E.ON and the National Grid - concluded that power plants would become less efficient as temperatures rise.

This could make distributing energy harder and potentially lead to a shortfall in supply.

"We all need to play our part in adapting to climate change" said Vincent de Rivaz, EDF's chief executive.