Insurers are well placed to manage climate change risks and government meddling will only increase the cost burden on consumers, the Insurance Council of Australia (ICA) says.

“Australia’s general insurance sector is well managed and tightly regulated, and has consistently demonstrated it is adept at coping with the extreme weather conditions it regularly faces,” CEO Rob Whelan said.

“Governments can also help Australians protect themselves against financial loss from extreme weather by allowing competitive insurance markets to flourish, free of unnecessary government interference that would expose taxpayers to multibillion-dollar liabilities.”

Mr Whelan has spoken out after Bank of England Governor Mark Carney made a speech to Lloyd’s of London last week saying insurers are vulnerable to losses caused by climate change.

ICA agrees insurers face long-term financial risk from changing weather patterns, and that Mr Carney’s speech underpins the need for government action to protect communities from extreme weather risks.

Beyond that, the speech holds more relevance for insurers in the northern hemisphere.

“ICA notes that the Productivity Commission has previously found government investment in permanent mitigation infrastructure to protect high-risk communities is more prudent and effective than pouring funds into disaster relief,” Mr Whelan said.

“This necessarily involves investments in mitigation strategies, improving town planning, enhancing building codes and upgrading existing structures to better withstand extreme weather events.”

The Sydney-based Climate Institute says Mr Carney’s speech should prompt the financial sector to start addressing climate change risks.

“We know climate change is already affecting our economy, and that some companies and financial institutions are acknowledging the implications for their own businesses,” Investment and Governance Manager Kate Mackenzie said.

“Yet many others are still forging ahead, as though climate change, and the economic transformation needed to deal with it, will have no impact on their plans.”