The cost of cleaning up storm damage will balloon unless the world takes urgent action to cut harmful emissions warming the globe, the Association of British Insurers (ABI) said on Wednesday (June 29). The group will call on leaders of the world's richest nations meeting in Scotland next week to slash carbon dioxide emissions, improve coastal defences and strengthen buildings to dampen the impact of the predicted storms.
"Governments now have a chance to make rational choices for the future, before it is too late," ABI's director of general insurance, Nick Starling, is set to tell a conference on Wednesday.
ABI members provide around 94 percent of Britain's domestic insurance market and hold 20 percent of the investments on the London stock market.
Damage costs from the three most expensive types of storms - hurricanes in the United States, typhoons in Japan and windstorms in Europe - will rise to $27 billion in an average year by 2080 up from $16 billion today if carbon dioxide emissions double their current rate, ABI's report said.
"Insurance acts as a messenger for the financial costs of climate change. Insurance is all about risk and assessing risk," ABI policy adviser, Sebastian Catovsky said.
The increasing cost of storm damage will have to be found in the international money markets, pushing up the cost of borrowing as demand grows, Catovsky said.
"This will have a knock-on effect both to capital markets and financial markets overall," he said. Britain's prime minister, Tony Blair, who is hosting the Group of Eight summit, hopes to push through radical plans to combat global warming, but US President George Bush opposes mandatory measures to cut emissions as too costly for industry.
The other members of the G8 are Canada, France, Germany, Italy, Japan and Russia.
The insurance industry needs to build up its cash reserves to around $200 billion from $120 billion it currently holds to pay for years with severe weather, he said.