Measures of underlying inflation, less influenced by specific price shocks, suggested a pick-up, albeit a much more modest one, from about 2½ per cent to about 3 per cent by mid 2006. A short-lived pick-up of that magnitude is not necessarily a major problem in itself.
Insurance is a case in point. Insurers have already started paying for climate change. Insurers’ risk models need to adjust to the increasing frequency and severity of the extreme weather events. Thus, the insurance industry clearly has incentives to be part of thesolution.