Insurance shock looms for coastal property owners

Escalating insurance costs for some oceanfront homes, others will be "uninsurable"

Buying coastal property could end up being a ‘natural lottery' if scientists turn out to be right about global warming. The international insurance community has warned that some regions could become ‘uninsurable' should global warming continue unchecked.

The warning came at a United Nations Environmental Programme conference in Cape Town where calls were made for developing countries to drastically cut greenhouse gas emissions within the next 10 years.

Vulnerable coastal regions are most at risk of being ‘dropped' by insurers. At best it would mean prohibitive insurance costs for property owners in those regions.

Local insurer Santam Ltd. is a member of the ClimateWise insurance group which raised concerns at the Cape Town conference last week. Currently Santam is in the process of assessing South Africa's coastal regions and areas close to rivers, to ascertain the specific risks for the country. A comprehensive report is expected to be released by early 2010.

Knysna and some areas of the Garden Route near the Great Brak River in the Western Cape have come under specific industry scrutiny following severe flooding in 2005 & 2006. Santam Head of Executive Risk Services Hendry Nigrini says the evidence is compelling that climate change has increased instances of flash flooding and other destructive natural storm phenomena in the country. "Like we saw a few days ago, suddenly in Cape Town, you have hail," but Nigrini adds that there are no regions in the country that are likely to become ‘uninsurable'. "We don't want to have any knee-jerk reactions," he says, "if a client is in a high risk area we will discuss ways to minimize the risk and charge higher premiums or perhaps a specific excess, we have always had a client-centric approach."

South Africa is better off than most when it comes to the natural security of its coastline. Our coastline is not subject to frequent cyclones as is Mexico and the United States, or severe flooding from annual seasonal rains as is Asia. Currently it is also not at the mercy of major earthquakes or volcanic activity. But a predicted rise in sea levels, could eventually threaten most low-lying coastlines and ocean-front property developments in such areas.

And don't be so sure it won't happen in your or your children's lifetimes. Executive Secretary of the Economic Commission for Africa, Aboulie Janneh, pointed to some alarming statistics for the continent when he addressed a regional commission of the United Nations on Tuesday:

  • By 2020 between 75 million and 200 million people would be exposed to increased water stress.
  • By 2020 yields from rain-fed agriculture would drop by 50 percent.
  • By 2080 arid and semi-arid land would increase by 5 percent to 8 percent
  • By the end of the century rising ocean levels would affect low-lying coastlines.

Despite increasing evidence from the scientific community that global warming poses a significant threat, large portions of society are skeptical and some believe the whole issue is a hoax. In the United States a poll released this week, suggested that the number of Americans who are concerned about global warming is in sharp decline. The results caused some consternation with authorities who have been driving the issue as a national priority.

Article from: www.realestateweb.co.za