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UK tourists to be offered extreme temperature insurance for holidays abroad as heatwaves change travel habits

British holidaymakers are set to be offered travel insurance for extreme heat as part of growing efforts to allow consumers to mitigate some of the effects of climate change on their trips.

Sensible Weather, a US-based insurance start-up which already sells insurance to UK travellers for trips disrupted by rain, is putting the finishing touches to policies which, rather than targeting the traditional vacation killjoy of downpours, will instead provide cover for debilitating heatwaves.

Extreme temperatures across the Mediterranean have disrupted daily life and holidays for millions in the last fortnight with wildfires from Greece to Portugal and the mercury reaching 47°C in Sicily.

The temperatures, caused by the Charon and Cerberus heatwaves pushing hot weather from north Africa, have opened a debate about whether significant numbers of travellers will start to seek cooler destinations rather than holidaying in countries such as Spain and Greece, whose economies are heavily reliant on tourism.

Sensible Weather, which was founded in 2019 as a climate risk insurer and analysis company, told i it is planning to bring in extreme heat cover as a way for travellers to hedge against holidays being ruined by rocketing temperatures. The company already offers its rain insurance via a number of UK providers ranging from individual campsites to package holiday giant Tui First Choice.

Nick Cavanaugh, a former climate scientist who is the founder and chief executive of Los Angeles-based Sensible Weather, said the company was fine-tuning what sort of temperature ranges and locations could trigger an insurance payout. He said: “We will soon be offering trip protection against extreme temperatures. We’ve found that travellers have different expectations for what’s ‘too hot’, depending on where and when they are going somewhere. So, as we roll the product out, we will modify our offering until we find the ‘sweet spot’ for a given customer, location and time of year.”

A beachgoer sits in the shade of an umbrella on the beach at the Lac de Cazaux lake, southwestern France, on July 6, 2023, as France braces for a sweltering weekend ahead. (Photo by Thibaud MORITZ / AFP) (Photo by THIBAUD MORITZ/AFP via Getty Images)
A beachgoer sits in the shade of an umbrella on the beach at the Lac de Cazaux lake in south-western France. There are already indications that European travellers are considering climate change and extreme weather conditions when deciding where to go on holiday (Photo: Thibaud Moritz/Getty)

Insurance cover for rain-affected events has become a successful “bolt-on” for many providers in recent years, while weather derivatives, a financial instrument which allows companies from energy providers to agriculture firms to hedge against the effects of unexpected climate conditions, has evolved into a multi-billion dollar industry in the last decade.

But until now, few if any have considered insuring against holiday weather being too sunny. Sensible Weather’s extreme heat product is expected to be modelled on similar lines to Sensible Weather’s existing rain coverage, which uses vast amounts of historic and current weather data to calculate the risk of rain and triggers an automatic pay-out when downpours are recorded by meteorological satellites.

Customers are charged a premium of about 10 per cent of the total cost of their holiday and a compensation payment typically becomes due for each day when there are two or more hours of rainfall between 8am and 8pm. Sensible Weather was this week offering First Choice customers a payout of £750 for each day of significant rain for a £1,500-per-person holiday for a family of four in Greece next month.

First Choice, which along with other Tui brands caters for six million UK travellers a year, indicated that it was considering adding the extreme weather cover to the insurance products offered to customers. A spokesperson said: “We are always looking for ways to expand on our products and features to deliver the best service for our customer’s needs.”

Mr Cavanaugh said Sensible Weather does not expect customers for its heatwave policy to be able to pick the temperatures at which they wanted compensation to be paid but suggested policies could offer differing pay-outs depending on the severity of the heat. He said: “We often structure tiered coverages for rain, which could and should apply to temperatures as well. For example, 35°C or more could reimburse 50 per cent, and 40°C or more could reimburse 100 per cent. The goal is to build a coverage that maximises value to the consumer while maintaining an affordable price and enabling us to cover our financial risk exposure.”

Tourism chiefs and hoteliers from Tunisia to Tuscany insisted this week that the heatwave had not had a discernible effect on the numbers of tourists this summer. But a European Union-funded study earlier this month suggested attitudes are already changing, with a 10 per cent drop in the numbers saying they intend to travel to the Mediterranean and an increase in interest in cooler destinations such as Ireland. The research by the European Travel Commission found that 7.6 per cent of people now consider worries about climate change and extreme weather to be a factor in where they holiday.

Mr Cavanaugh said he believed financial instruments like weather insurance could help insulate both customers and holiday companies from the uncertainties posed by climate change. He said: “While ‘hard’ technologies like carbon removal will be required to help curb future climate impacts over the long term, financial technologies like insurance… can help offset the adverse impacts of climate change over shorter durations.

“Our aim is to directly protect the consumer from these impacts, thereby indirectly protecting the hospitality industry at large by mitigating potential revenue loss from decreased consumer demand or satisfaction.”

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