The insurance industry can rise to the challenges of climate change but not without innovation and courage, says Jardine Lloyd Thompson (JLT)’s Asia-Pacific Executive Chairman Brian Carpenter.

Addressing the Australian and New Zealand Institute of Insurance and Finance southern regional conference in Albury, NSW, he told the 120 delegates he has concluded from his own research that the world can expect a higher frequency and severity of natural catastrophes.

He says the industry may reach a “crisis point” with the increased demand for more insurance protection.

Mr Carpenter offered the examples of innovator Cuthbert Heath, who in 1885 became the first Lloyd’s underwriter to write reinsurance of a fire risk, and the emergence of new risk capital structures during hard market cycles over the past three decades.

“The Ace Group and XL Insurance are classic examples of this, both companies emerging out of the Bermudian market in a direct response to insurance-buyers’ desire for cover and capacity,” he said.

“During the current decade, following severe hurricanes in the Gulf of Mexico that particularly affected the oil and gas industries and, of course, Katrina which devastated New Orleans in 2005, we saw our industry respond with an injection of $20-30 billion in risk capital that took advantage of the hardening market but still provided capacity and cover to insurance buyers.”