Transcript Climate Change and its impact on European Windstorm scenarios

Responses to climate change from a reinsurer’s
perspective
Eberhard Faust, Munich Re
Copenhagen, 22nd January 2008
Loss trends from natural hazards world wide
(1950 – 2006)
2
200
Overall losses (2006 values)
Insured losses (2006 values)
Loss [US$ bn]
150
2004 & 2005
hurricanes
Trend overall losses
Trend insured losses
100
Global weather catastrophes:
Great catastrophes
1977-1986: US$ 9bn/year
50
1997-2006: US$ 45bn/year
0
1950
16
1970
1980
1990
2000
1980
1990
2000
Storm
Flood
Temperature extremes
(e.g. heat wave, drought)
Geophysical hazards
12
Number
1960
8
Great catastrophes
4
0
1950
1960
1970
Windstorm losses in Denmark: January 2005
3
- High susceptibility of modern societies,
infrastructures and industrial
technologies to natural hazards.
Natural Disasters in Scandinavia 1980 – 2007
(Norway, Sweden, Denmark, Finland) – Overall and insured losses
4500
Overall losses (2007 values)
4000
Insured losses (2007 values)
4
Winter storm
Gudrun/Erwin, 7-9 Jan 2005
Winter storm
Anatol, 3-4 Dec 1999
Million €
3500
3000
2500
2000
Denmark:
€ 2.6bn overall
€ 2.1bn insured
1500
1000
Denmark:
€ 1.1bn overall
€ 0.76bn insured
500
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
© 2008 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE
As at January 2008
Natural Disasters in Scandinavia 1980 – 2007
(Norway, Sweden, Denmark, Finland) – Percentage distribution
Number of events: 163
5
Number of deaths: 113
0%
1%
20%
23%
Earthquake/Subsidence
59%
Storm
Floods
Extreme temperatures
4%
17%
76%
Overall losses: 15,000m €**
15%
Insured losses: 6,500m €**
0%
5%
0%
5%
** 2007 values
80%
© 2008 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE
95%
As at January 2008
Time series of mean climate parameters
6
GLOBAL
2007 departure: +0.41°C
7th warmest on record
10 warmest years
since 1850 (global)
1.
1998
0.52
2.
2005
0.48
3.
2002
0.46
4.
2003
0.46
5.
2004
0.43
Global average sea level
6.
2006
0.42
Difference from 1961-1990
Source: IPCC 4AR 2007
7.
2007
0.41
8.
2001
0.40
9.
1997
0.36
10.
1995
0.28
(preliminary assessment)
Source: Climatic Research Unit,
University of East Anglia, 2007,
extended
Northern Hemisphere snow cover
Difference from 1961-1990
Source: IPCC 4AR 2007
8 warmest years
comprise all of
the 7 last years
Humanity‘s contribution to global warming
7
Black: Observed global temperature
Yellow: Simulation with climate models
Red:
Running mean of simulations
Natural drivers (sun, volcanism)
and man-made emissions (greenhouse
gases, particulates)
Source: IPCC 4AR 2007
Black:
Observed global temperature
Light blue: Simulation with climate models
Blue:
Running mean of simulations
Only natural drivers (sun, volcanism)
Observed climate change in Denmark
8
°C
mm
Mean annual temperature
1873 - 2006
Mean annual precipitation
1874 - 2006
Source: DMI 2007
Source: DMI 2007
Annually +1.5°C warmer
today
than in the 1870s
Annually 100 mm more
precipitation today
than in the 1870s
Observed climate change in Denmark
9
No obvious trend in
storminess over 100 years…
Source:
DMI 2007
But climate models project for the future (2080s):
Enhanced winter wind maxima
over Denmark in the 2080s…
Wind driven surge heights
%
…
project onto
maximum
wind driven
surge heights
Woth/von Storch 2007
HadAM3H, scenario A2
Woth/von Storch
2007
m
Sea level rise for various emission scenarios
10
140 cm
IPCC 4AR 2007:
Range of mean global
sea level rise (2081-2099):
20 – 60 cm
North Sea: plus 10 – 15 cm
A1FI
80 cm
B1
Scenarios for maximum surge levels
Scenario 2050s:
+ 30 cm SLR + 5 cm North Sea effect + 5 cm
wind driven surge (in total: +40 cm)
50 cm
Scenario end of 21st century:
+ 80 cm SLR + 10 cm North Sea
effect + 30 cm wind driven surge
(in total: +120 cm)
*Basis: Range of ΔT = 1.5º-5.8ºC (IPCC TAR)
Source: S. Rahmstorf (2007), Science, 315, 368
Projected climate change for Denmark
11
Winter 2080s:
- increased storminess, maximum windspeeds up to 10% higher
- maximum storm surge levels could be 70 – 180 cm higher
(sea level rise + increased wind driven surge heights)
- precipitation will increase by up to 40%
- temperatures will be higher by up to 3°C
Summer 2080s:
- precipitation will decrease by up to 25% (particularly in northeast
Jylland and Sjælland)
- less rain days, extreme precipitation events could even intensify
- more hot days, longer dry periods
Consequences for the insurance industry
Underwriting/risk management
12
Climate change requires appropriate risk management
Risk identification

Risk evaluation
Impact of weather disasters on the
Use of probabilisitc nat. cat. risk models and
international insurance market
adjustments to changing hazard situations
Risk control
Risk financing

Adequate technical pricing

Accumulation control
 Insured persons or entities

Substantial deductibles
 Primary insurers

Liability limits
 Reinsurers

Loss prevention/information of the insured
 Capital markets

Improved claims settlement
 Governments/public authorities

Reinsurance, retrocession and risk capital
Cooperation of all parties involved required:
Carbon neutrality of Munich Re
13
Munich Re Munich: 2009
Munich Re Reinsurance worldwide: 2012
Measures :
• Reduction of emissions per employee
• Usage of "green" power electricity
• Investment in renewable energies and afforestation
• In return for remaining emissions investment in emission certificates used for
climate-protection projects in emerging countries
Munich Re’s approach to climate change
Strategic areas
Risk assessment/
underwriting
14
Management
of assets
New markets/
new products
Changed frequencies/
intensities of weather
hazards in underwriting/risk management
Integration of sustainability
criteria into investment
strategies
Pathway to low-carbon,
hazard-adaptive
economies: new
business opportunities
Examples:
Examples:
Examples:
• Tropical cyclones,
El Niño/La Niña, …
• Investments acc. to
sustainability criteria
• Prospective risk
management
• Development of a climate
asset analysis tool
• Kyoto Multi Risk Cover
(delivery of carbon
credits as planned)
• Holistic approach in
risk models (budgets)
• Retail fund investing acc.
Dow Jones Sustainability
• Climate risk analyses of
clients’ portfolios
• Transparency (CDP
participation)
• Microinsurance in
developing economies
• Covers for renewable and
low-carbon energies/
energy efficient technology
Munich Re’s approach to climate change
Strategic areas: Renewable energies
15
Source: Bundesverband WindEnergie e.V.
Source: Ocean Power Delivery Ltd
Offshore Windfarm near Copenhagen
Munich Re’s approach to climate change
The insurance sector’s role & required policy preconditions
The role of insurance industry – in partnership with society
- products enhancing society’s hazard-adaptive capability
- products promoting society’s emissions reduction goals
- transparency of risks via risk measurement & risk adequate premiums
=> sound actions, prevention, reduced loss loads for society
- provision of data on weather-related losses to science,
political decision makers and the public
Required policy preconditions
- regulatory frame (building codes, land use, prevention measures)
16
To sum up …
17
Climate change
- large global challenge, also for Denmark (sea level rise, storms, storm
surge, floods …).
Also provides substantial business opportunites for the insurance sector.
Insurance industry’s role
- products promoting society’s hazard-adaptive capability
and emission reduction efforts
- e.g. insurance solutions for renewable energies (off-shore wind,
wave power plants, …) besides nat cat covers
- societal transparency of risks
- investment decisions due to sustainability criteria and climate
sensitivity of enterprises
Insurance industry aligned with societal interest
- good match of the insurance industry’s business model and societal & clients’
interest (hazard-adaptive society, emissions mitigation)
Thank you for your attention!
Natural Disasters in Scandinavia 1980 – 2007
10 costliest events in Denmark
19
Date
Country/Region
Event
Fatalities
Overall Insured
losses
(Mio. €*)
3.-4.12.1999
Denmark
Winter storm Anatol
7
2,600
2,100
8.-9.1.2005
Denmark
Winter storm Erwin
4
1,100
760
15.5.-31.7.1992
Denmark
Drought
0
680
0
24.-25.11.1981
Denmark
Winter storm, storm surge
9
290
130
25.-26.1.1990
Denmark
Winter storm Daria
0
90
45
13.-14.1.1993
Denmark
Winter storm Verena
0
90
40
18.01.1983
Denmark
Winter storm
2
70
55
29.-30.1.2000
Denmark
Winter storm Kerstin
0
65
40
12.-15.1.1984
Denmark
Winter storm
0
50
0
25.-27.2.1990
Denmark
Winter storm Vivian
0
45
30
*losses in original values
© 2008 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE
As at January 2008
Munich Re’s approach to climate change
Risk measurement / underwriting
20
- For instance, adjustment of risk measurement to enhanced atlantic hurricane
activity since the mid-1990s
US nationwide
500
US Nationwide
450
400
adjusted to current
warm phase activity
Loss [US$ bn.]
350
300
WKP
Reihe2
Reihe3
Reihe4
250
200
150
100
all events from
historical catalogue
50
1
10
100
Return Period
1.000
10.000