Climate change represents a major threat to the insurance industry in the form of increased costs. This was the blunt warning from AXA claims director David Williams.

"While debate surrounds the link between global warming and an increased frequency of extreme events, it's clear that infrastructure and population density in fragile regions multiplies the size and maximum potential losses resulting from such events," says Williams.

Given the relationship between property damage versus weather events severity, this will lead to increasing costs from the higher prevalence of extreme weather events.

The cost of increasing extreme weather events globally in 2003 totalled a whopping $15bn, and in 2004 it was $40bn.

"Our own estimates suggest by 2050 this figure could be as high as $300bn a year. Although the changing climate in the UK is difficult to identify, consensus is now forming that we're seeing steady warming of the UK climate above historical norms."

Williams further warns that in recent times Britain has started to see explicit evidence of warming. "Out of the eight years in the last 100 where England had an average temperature above 10.50 Celsius, not a single one of these was prior to 1989, and the 1990s was the hottest decade on record. I believe that in deciding as a country how we react to and try to prevent further climate change, we must first rigorously investigate and understand what we believe the true economic costs of such changes in our climate would be."

Williams says a global effort like the Kyoto protocol is required to reverse the trend. "It's unfortunate that the US has not ratified the protocol and that Australia decided not to sign the agreement, as this does undermine the efforts of all other signatories. However, the responsibility of helping to reduce climate change lies not just with governments, but with every individual and business as well."

The insurance industry is in a unique position, as it has a broad understanding of the risks associated with climate change such as flood, subsidence and storms.

"Climate change is likely to mean increasing frequency and severity of losses. It may also mean we will see class action suits being launched against regulators and major greenhouse gas emitters - which will impact on liability claims as well.

"On a global basis, it may fundamentally affect financial markets, as supply failures and shortages occur - for example, food and water shortages resulting in human conflict.

"We have an opportunity to help prevent such outcomes by making our customers, particularly business customers, aware of the risks and how to mitigate against them."

"Perhaps more importantly, we are in a position to influence businesses to be more eco-virtuous. Thus our contribution is integral."