Dubai, situated in one of the world’s driest regions, was hit with a second bout of heavy rains and strong winds this week — just two weeks after the desert metropolis was covered in a year’s worth of rain in the span of 12 hours.
Dubai’s extreme weather may lead to insured losses of up to $850 million across infrastructure, roads, buildings, vehicles, and public facilities, estimated the reinsurance broker Guy Carpenter.
The extreme weather event is one of many that have brought attention to climate insurance, and experts expect policy prices to rise. From airports to tours to hospitality to destination management, unforeseen climate events can have extreme impacts on the travel industry.
Downpours in the desert
Between April 14 and 17, floods brought Dubai to a standstill. The city’s airport, the second-busiest in the world, shut down, hundreds of flights were canceled, and people and cars were stranded. In Dubai and neighboring Oman, 21 people died.
Emirates diverted dozens of flights and canceled nearly 400 in the three days following.
”We know our response has been far from perfect,” said Emirates CEO Tim Clark in a statement.
Some initial reports blamed the floods on a technology the United Arab Emirates has been funding called “cloud seeding.” It involves small jets flying into rain clouds and spraying them with sodium mixtures meant to expand the droplets and encourage more rain.
The technology does work to spill buckets of sudden rain on parts of the UAE every now and then.
However, experts said cloud seeding is too small scale to create downpours like what Dubai endured. Instead, climate change was the most likely culprit. And it will almost certainly happen again.
Extreme weather worldwide
Despite the shocking nature of the event in Dubai, it isn’t actually unprecedented. In 2022, flash floods destroyed homes and infrastructure in the UAE, forcing more than 3,800 people to evacuate. The World Weather Attribution found that 85% of the UAE live in flood-prone areas.
Other impacts of global warming, such as rising temperatures, are also creating consistent financial and operational liabilities for travel companies.
In 2023, a wildfire that lasted for six days forced 25,000 tourists to evacuate from the Island of Rhodes. EasyJet and TUI operated repatriation flights and Greece launched “free” holidays for those who had to flee.
Increasingly hot summer days have already made it impossible for some operators to schedule active trips like cycling vacations in Southern Europe.
“It’s simply too hot,” said Shannon Stowell, CEO of the Adventure Travel Trade Association.
Stowell says he knows of several operators in Italy and Spain who are looking to move their active trips to northern destinations like Scandinavia.
Other countries are struggling as ski seasons are either cut short or eliminated due to higher temperatures. Wildlife migration is also changing, bringing sharks to waters that have never been seen there before.
“Tour operators are being forced to think about what shorter seasons or more logistical costs will mean to their businesses and have to look at other ways of bringing in revenue,” he said.
Rising Climate Costs
The increasing rate and intensity of extreme weather disasters has placed the question of climate insurance center stage because experts expect prices to rise.
“Underwriters are unlikely to forget about [these floods] anytime soon,” said Sami Doyle, CEO and Co-Founder of TMU Management, an insurance intermediary focused on travel.
“At this early stage, it would be hard to say how much of an increase to expect, Doyle said. “But for sure, it won’t be going down when you mention Dubai. And it could easily go up enough to make sellers think twice when pricing future sales. Certainly, we’d advise to expect a noticeable increase.”
While some companies are considering ways to mitigate their exposure to natural disasters, few seem to be actively investing in climate insurance.
“Some large companies have been hit quite severely,” said Neil Gunn, head of flood and water management research at WTW Research Network, adding that a few companies have taken actions like buying climate insurance to safeguard their business. “We expect that more will, especially with the recent incidents.”
But many companies are either not making the move to develop their resilience and purchase insurance, or they are in the very early stages of doing so.
TUI told Skift it hadn’t taken any specific actions following the recent floods.
“Developing the resilience of our services is a continuous process,” said a spokesperson at TUI, adding that it has done a company-wide risk analysis for TUI’s worldwide infrastructure. The analysis said that “the risk of airport disruption was found to be in the low physical risk analysis.”
Talk of “climate resilience”
Experience-based companies say that insurance and resilience aren’t on their radar because the industry provides built-in flexibility.
“Because the majority of tours and attractions are booked within 2-3 days of the activity taking place…our industry tends to see less impact than others with these disruptions and thus has less need for climate insurance,” said Craig Everett, CEO and Founder of Holibob, a company that provides tours & experiences technology to online travel sellers and tourism boards.
GetYourGuide said that climate insurance isn’t something it is pursuing right now.
Yet some experts say that preparedness still needs to be considered.
“The growing frequency of extreme weather and rising risks from climate change make having crisis management plans that much more important for operators,” says Douglas Quinby, co-founder and CEO of Arival, a travel events and research firm.
What may be next
Doyle said that insurance increases should be factored into future costs and pricing and that companies need to consider their safety within their destination.
“Ask yourself, am I overexposed at this – or indeed any – destination?” Doyle said.
Gunn at WTW says there are several steps companies can take to reduce their risk of flooding: develop flood emergency plans with evacuation routes and procedures for shutting off utilities to protect equipment. They can also install backup generators and ensure that their insurance policies adequately cover flood damage and business interruptions.
“Flood and climate change will inevitably become more of a consideration in the Middle East than they have up to now,” says Gunn. “While it is too early to predict the long-term impact on pricing, we do expect terms and conditions, particularly deductibles for perils like water damage and flood, to be reviewed with greater scrutiny in the coming years.”
