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Final Report
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than concrete and masonry dams. The report also strongly recommended that climate change
should be taken into account in future reviews under the Reservoirs Act 1975. (Babtie and
Institute of Hydrology, 2002). It should however be noted that reservoirs in the London area do
not impound rivers but are filled by pumping water into them from rivers under a managed
operational regime.
More than 50% of Britain’s reservoirs are over 100 years old and made of earth embankments.
The Reservoir Act 1975 stipulates a regular inspection program for all reservoirs which ensures
that structural integrity is maintained.
There are several raised storage reservoirs in the Greater London area for example along the
Thames and Lee valleys. These are often situated along rivers but may also be near urban areas.
Although the risk of failure is low, planners need to be aware of the potential hazard when
considering new housing developments in such areas. Future climate change impacts are
considered as part of the mandatory maintenance and inspection program of all dams and any
new development built near to the reservoirs have the same level of protection as existing
properties under the class A rating of the dams, this is a statutory provision under the Reservoir
Act 1975.
7.5.6 Potential Meso- and Macro-economic Effects of Climate-Change Related
Impacts on the Insurance Industry
The current practice is for insurers to offset underwriting losses - of the type identified above as
resulting from climate related events - against investment income. A consequence of this is that
investment returns are likely to fall, with a subsequent re-alignment of premium payments - and
therefore consumer prices - upwards. A related consequence if the climate event is severe
enough - as it was for the 1987 windstorm - is that insurance companies may be forced to reduce
their level of capitalisation in capital market or property market equity. In this instance, there
will be a downward shift in equity prices which reduces liquidity in the financial sector and has
a deflating effect on investment in the economy, and therefore economic growth. Such a
reduction in the level of capitalisation of the industry is also likely to be accompanied by
internal retrenchment of insurance operations and a shrinkage in employment levels in the
sector.
The threat to the sector identified above in the UK is exacerbated significantly by the high level
of inter-dependence that exists in global capital and insurance markets. The scale of climate
change impacts identified for the UK may potentially be significantly increased by climate
change in other parts of the world, where assets are insured against damage in the London
insurance market. For example, where an incidence of increased tropical storms is expected (as
in the southern states of USA and the Caribbean), buildings and transport infrastructure are
likely to suffer increased levels of damage - assuming existing construction specifications -
leading to increased claims against the insurance industry. Indeed, such claims will impact on
the London-based insurance and financial services industries even if the insurer claimed against
is not based in London since there might be a (marginal) global squeeze on financial liquidity.
These types of future risk changes are already being considered in the development of the global
market strategies within the London insurance industry.
IPCC (2001) notes as a measure of insurance vulnerability the ratio of global property/casualty
insurance premiums to weather-related losses fell by a factor of three between 1985 and 1999.
The IPCC synthesis concludes that ‘there is high confidence that climate change and anticipated
changes in weather-related events that are perceived to be linked to climate change would