The UK’s Prudential Regulation Authority warns insurers they could get burned by investing in fossil fuels.

Deputy Head Paul Fisher told the Economist’s Insurance Summit in London a successful insurance industry will need to respond to change, and be dynamic and robust.

It is vital to “look out for potential storms ahead”, including climate change, which will bring more frequent and severe extreme weather.

But it is not only increasing claims that should concern the industry.

“Insurers, as long-term investors, are also exposed to changes in public policy, because this affects the investment side,” Mr Fisher said. “One live risk right now is of insurers investing in assets that could be left ‘stranded’ by policy changes that limit the use of fossil fuels.

“As the world increasingly limits carbon emissions, and moves to alternative energy sources, investments in fossil fuels and related technologies – a growing financial market in recent decades – may take a huge hit.

“There are already a few specific examples of this having happened.”

Mr Fisher also warns digitisation and enhanced technology may be “a double-edged sword”.

“Technological enhancements bring new opportunities to businesses, but the pace of innovation must be met by the pace of corresponding safeguards to deal with the risks,” he said.

Cyber crime is of particular concern, “with ever more frequent and increasingly sophisticated” attacks on businesses and individuals.

“A new business opportunity for sure,” Mr Fisher said. “But, unlike most other insured risks, insurance companies could themselves be significant victims.”