Natural disasters are now so frequently happening that reinsurers, the firms that sell insurance to insurance companies, are scaling back their exposure to such risks.
While it may make business sense, it raises the question of whether individuals and businesses will be able to protect themselves against the effects of climate change if their insurance companies cannot even offer coverage themselves.
Just weeks after wildfires caused major damage in Hawaii and parts of Europe, and as catastrophic floods ravaged Libya, the issue was front and center at a major industry gathering held in Monaco this week.
Reinsurers identified climate change as the biggest risk they now face in a survey by PricewaterhouseCoopers and the Centre for the Study of Financial Innovation.
rating agency Fitch said in a note to investors ahead of the conference, that some companies 'were already retreating from the property-casualty market in 2022'.
Even the strongest reinsurers have now pulled back, largely through tightening their terms and conditions to limit their aggregate covers and low levels of natural disaster protection.
S&P said that more than half of the top 20 global investors maintained or reduced their natural disaster exposures during the January 2023 renewals, despite the more improved price terms and conditions and rising demand.
AXA's reinsurance unit raised prices 6.3 percent during the first half of last year, but it took in three percent less, mostly because of a reduction in exposure to natural disasters.
Fitch notes that reinsurers are reducing their exposure to so-called secondary peril events. Small weather events that are growing and virulent due to climate change are becoming more frequent and erratic.
Fitch said reinsurers are still offering sufficient cover against the most severe weather events.
Climate disasters in the United States, where losses exceeded $1 billion, averaged 18 per year between 2018 and 2022, up from 8.1 events between 1980 and 2022, according to data released by the National Oceanic and Atmospheric Administration.
In the first eight months of the year, the United States was hit by a record-breaking 23 such events.
The number of natural disasters has led to a surge in the demand for intermediaries.
Providing coverage against risks with'really high frequency... doesn't make any sense', said Thomas Blunck, head of the reinsurance committee at Munich Re.
These natural disaster policies were initially developed to protect insurers from extreme events and not against the volatility inherent in the business, Conoscente said.
But the repositioning of reinsurers is not without consequences for traditional insurers.
Jean-Philippe Dogneton, head of Macif and France's chief executive, criticized the 'rapid' and 'brutal' shift in the reinsurance industry.
Fitch spokeswoman Robert Mazzuoli said some reinsurers 'were abrupt with their clients and treated them poorly'.
Insurance firms may have little choice than increase their rates or reduce the risks that they cover, which is already happening in certain countries.
Scor's Conoscente said that 'you can get insurance anywhere' but on the condition of being able to 'pay the necessary price'.
The real problem is that 'a large part of the population isn't ready to pay the real cost' of climate change.