(^64) Tourism Human Development Report - Croatia 2008
Box 4-2: Financial risks and climate change.
Within the financial sector, climate change risks are
being taken very seriously - especially in the insur-
ance industry. This is important to tourism because
of the number of buildings that may be vulnerable
to climate impacts (flooding, forest fires, strong
winds and storms, etc.). Insurance companies have
been responding very quickly in understanding
climate change issues. Practically all major insur-
ance houses have already initiated their own re-
search and taken steps towards addressing climate
change issues.^47 The insurance industry perceives
climate change as a potential risk, an opportunity
and somewhere in between. Most often, insurance
related to climate change deals with property insur-
ance. Extreme weather events of recent years such
as hurricanes have led large insurance companies to
impose higher policy rates or simply refuse to pro-
vide coverage altogether.^48 For example, faced with
high losses in 2005, insurers in the USA Gulf area
cancelled more than 600,000 homeowners’ policies
or refused to renew them. Many commercial busi-
nesses could not find property insurance at any
price. On the other hand, insurers who continued to
issue policies at higher rates earned enormous prof-
its, as there were no major hurricanes in the area in
2006 and 2007.^49
For the banking sector, climate change does not yet
seem to be of great concern. Following the massive
damages to infrastructure in Europe (floods in 2005)
and the US (hurricane Katrina in 2005), the situation
is changing, but banks are still protected. However,
losses due to natural disasters may overwhelm in-
surance and banking markets. One scenario esti-
mates that disaster losses could reach over EUR 640
billion in a single year by 2040.^50 The impacts will be
worse in developing countries where the capacity
to manage climate related disasters is much lower.
In Croatia, the large majority of hotels and other
registered apartment renting facilities do have “fire
insurance” – which, in addition to fires, covers ex-
treme weather events. There is a long tradition of
insuring business assets (in this case buildings) in
Croatia, which may be the reason why a higher de-
mand for insurance due to increased natural disas-
ters has not been seen.
The UNEP FI CCWG (2006) report presents key rec-
ommendations for the financial sector:
- Recognise the reality of climate change and
mainstream it into all business processes. It
is a decision factor for business planning and
strategies, portfolio management, and at the
individual transaction level. - Develop and supply products and services
for the new markets that will emerge with in-
tegrated adaptation; e.g. at the micro-level in
developing countries, and in the area of eco-
logical services. - Work with policy-makers to undertake a transi-
tion to integrated adaptation. - Ensure that contingency plans consider “worst
case” disasters.
smaller scale entrepreneurs can capitalize on tourist vis-
its, the outcome is more positive for middle-class entre-
preneurs. If the climate becomes an extremely adverse
factor and tourists stop coming in large numbers, cer-
tainly those on the fringe of the industry will suffer the
most. This could impact not only room renters, but other
people who sell goods and services to tourists.Finally, changes in climate – especially related to an in-
creased frequency of natural disasters – could have a sig-
nificant impact on the financial sector and the insurance
industry covering tourism and tourist destinations. See
Box 4-2 for more information about the global situation
regarding the risks to tourist destinations from climate
change.