Transcript Climate Change in Europe

MUNICH RE SEMINARS NON-LIFE
REINSURANCE l CASUALTY l PROPERTY l MARINE l ADDITIONAL TOPICS
Global Warming a Risk of change
New challenges for the insurance industry
A paper by Prof. Dr. Peter Höppe, Munich Re Head of Geo Risks Research presented by
Alexander Milberg, Munich Re Malaysia at the
National Seminar on Socio-Economic Impacts of Extreme Weather
and Climate Changes
Kuala Lumpur 22 June 2007
Content
Climate change
- Extreme events of last years
- Facts and scientific basics
- Effects
- Challenges
Risk of change – Peter Höppe
Trends of Natural Disasters
The last years have brought records in natural disasters in respect to:
Intensities
Frequencies
Damages and losses
Risk of change – Peter Höppe
Heat wave of 2003, the largest humanitarian natural
catastrophe in Europe for centuries
Perceived Temperature on 8 August 2003 and excess mortality
Source: German Weather Service, 2004
Heat stress
2,000
†
extreme
2,000
†
high
7,000
†
15,000
†
moderate
light
comfortable
light
moderate
high
extreme
4,000
†
4,000
†
Cold stress
UTC
13:00
Risk of change – Peter Höppe
2004: 1st Hurricane in South Atlantic
Hurricane Catarina off the Coast of Brasil, March 2004
Source: Image courtesy of Earth Sciences and Image Analysis Laboratory, NASA Johnson Space Center, Bild-Nummer
ISS008-E-19646. http://eol.jsc.nasa.gov
Risk of change – Peter Höppe
July/August 2005 – Flooding in India
944 mm rain within 24 hours, highest ever in India
24.7- 5.8 Flooding in India (1.150 fatalities)
Economic losses (US$ m):
Insured losses (US$ m):
5.000
770
August 2005 – Hurricane Katrina
6th strongest hurricane, largest losses of a single event
25.-30.8 Hurricane Katrina, USA (1.322 fatalities)
Economic losses (US$ m):
Insured losses (US$ m):
125.000
40.000
Risk of change – Peter Höppe
2005, a Year of Weather Extremes
Never before since the beginning of records (1850) have so many named
tropical storms occurred in the North Atlantic basin in one season:
28, of which 15 with hurricane strength
(old absolute record 21 in 1933, resp. 12 in 1969)
Risk of change – Peter Höppe
Hurricane Vince (9 October 2005)
Vince, a hurricane in a region without hurricane risk
(easterly North Atlantic, Madeira)
Risk of change – Peter Höppe
Heat wave in the Netherlands – July 2006
The warmest July since records began
Deaths per week and average maximum temperature
=> 1 000 more fatalities than usual in July
Risk of change – Peter Höppe
Winterstorm Kyrill, 18-19 January 2007
Simulation: GeoRisikoForschung, Münchener Rück
Fatalities: 48
Economic losses (€ m):
Insured losses (€ m):
10.000
5.000 -7.000
Risk of change – Peter Höppe
Reasons for globally increasing losses
due to natural disasters
Less problematic
• Rise in population
• Better standard of living
• Increasing insurance density
Problematic
• Concentration of people and values in large conurbations
• Settlement in and industrialization of extremely exposed regions
• Change in environmental conditions - Climate Change
Risk of change – Peter Höppe
Global mean temperature, 1856 - 2006
Departures in temperature from the 1961-1990 average
Temperature anomaly (°C)
2006: +0.42°C
above the 1961-1990
annual average
(14°C).
0,6
0,4
The five warmest
years in decreasing
order are:
0,2
1998, 2005, 2003,
2002 and 2004.
0
-0,2
-0,4
-0,6
2005
1995
1985
1975
1965
1955
1945
1935
1925
1915
1905
1895
1885
1875
1865
1855
Source: Climate Research Unit, UK (2007) in conjunction with Hadley Centre of the UK Met Office
Risk of change – Peter Höppe
Global and Regional Temperature trends in the
20th century: modeled and observed
+ 0.8 °C
Source: climateprediction.net, Oxford University
+ 0.7 °C
Risk of change – Peter Höppe
CO2 concentration in the atmosphere
of the past 650,000 years from the Vostok ice core, Antarctica
400
380
2006:
360
383 ppmv CO2
CO2 (ppmv)
340
320
300
280
260
240
220
200
180
160
-650 -600 -550 -500 -450 -400 -350 -300 -250 -200 -150 -100
-50
0
Thousand years before present
Sources: Siegenthaler et al. (2005), Spahni et al. (2005), Röthlisberger et al. (2004)
Risk of change – Peter Höppe
Scientific Evidence of a Link between
Global Warming and Extreme Events
It is very likely (CL >90%) that human influence has already at least doubled the
risk of a heat wave exceeding the magnitude of the European heat wave 2003
(Stott et al., Nature 2004).
Major tropical storms both in the Atlantic and the Pacific region have already
increased since the 1970s in duration and intensity by about 50 percent
(Emanuel, Nature 2005; Webster, Science 2005).
Due to climate change the sea surface temperatures have increased already by
0.5°C (Barnett, Pierce, 2005, Science; Santer et al., PNAS, 2006).
Of all the factors only the steady increase in sea surface temperatures over the
last 35 years can account for the rising strength of storms in six ocean basins
around the world (Webster et al., Science 2006).
Insured losses from winter storms will more than double in some European
countries (Denmark, Germany) until 2085 due to global warming (study
sponsored by SR, Schwierz, submitted 2007).
Risk of change – Peter Höppe
The global frequency of most destructive
tropical storms has increased since the 1970s
Webster et al., Science, Vol 309, September, 2005
Risk of change – Peter Höppe
Climate Change in Europe – Example Winter Storm
Results of the study
„Modelling European Winter Wind Storm Losses in Current and Future Climate“
(Conny Schwierz (ETHZ), submitted 2006)
Climate Model
Insurance Risk Model
combined
Result:
 Climate change increases insurance losses significantly...
Risk of change – Peter Höppe
Climate Change in Europe - Example Winter Storm
Expected average increase of losses in Europe
for the period of 1975 - 2085
Europe
Denmark
Germany
Sweden
Belgium
France
Great
Britain
44 %
116%
114%
95%
80%
47%
35%
Source: Conny Schwierz (ETHZ), submitted 2006
Because of the changing tracks the impact is
different in the European countries
Risk of change – Peter Höppe
Changes in sea level rise and projection for
different scenarios
Temperature-dependent approach*
140 cm
A1FI
B1
50 cm
*Basis: Range of ΔT = 1.5º-5.8ºC (IPCC TAR)
Source: Stefan Rahmstorf (2007), Science Vol. 315, p.368
Risk of change – Peter Höppe
Changing risk
Increase in greenhouse gases
more extreme
weather events
e.g. windstorms,
Increase in temperature air + sea
Increase in humidity
hail storms, rain storms
and drought
important for insurer:
Increase in sea level
- stronger events
- frequent events
Risk of change – Peter Höppe
Climate Change affects Insurance Industry
• Increase in weather variability
• New levels of weather extremes
• New kinds of weather risks
• Higher loss potentials
• Lacking experience in new kinds of damages
• Increased capacity demand due to larger accumulation risks
• Prospective premium calculation becomes necessary
• Due to increased coverage of climate change by the media and own
perception of changes in weather patterns higher demand for nat cat
covers
• New insurance products can be developed
(e.g. Kyoto Multi Risk Policy of MR)
Risk of change – Peter Höppe
How can the Insurance Industry prepare
for the Increasing Catastrophe Risk?
• Development of new risk models considering climate change
(more data on shorter term effects of global warming needed)
• Adequate pricing
• Substantial deductibles, based on the respective exposure
• Accumulation control
• Loss prevention
• Improved claims settlement
• Liability limits
• Exclusion of certain hazards
• Exclusion of particularly exposed areas
• Reinsurance, retrocession
• Private-public partnership
Risk of change – Peter Höppe
Insurance of Natural Hazards
Carrier of the burden/liabilities
Insured
Insurer
future solution?
unlimited
up to now
Reinsurer
limited
Insured
Insurer
§
Reinsurer Government
Risk of change – Peter Höppe
Insurance Industry has high Potential
to Promote Climate Protection
Munich Re: many activities to promote climate protection
- Member of The Climate Group
- Member of the Global Roundtable on Climate Change (Jeff Sachs)
- Board member of the European Climate Forum
- Hosting side events at the annual global climate summits of the
UNFCCC (COP)
- UNEP-Financial Initiative
- Carbon Disclosure Project
Risk of change – Peter Höppe
Munich Re: Co-Initiator of CRO Briefing
Position Paper on Hurricane Risk and Climate Change
To raise awareness of global warming
as a relevant factor of insurance industry
CRO briefing published on 20 June 2006
Risk of change – Peter Höppe
Munich Re: Initiator of International Workshops
UN DE R S TAN DIN G
AND
A T TR IB U TIN G
25 - 26 Ma y 2006
TR E N DS
AND
PR O JE CTIO NS
H o h e n k a m m e r , Ge r m a n y
To discuss the attribution of increasing losses to climate
change with a high level group of participants from science
and insurance industry.
Risk of change – Peter Höppe
Consensus (unanimous) statements of the
workshop participants
Syllabi:
Climate change is real, and has a significant human component related to
greenhouse gases.
Direct economic losses of global disasters have increased in recent
decades with particularly large increases since the 1980s.
The increases in disaster losses primarily result from weather related events,
in particular storms and floods.
Climate change and variability are factors which influence trends in
disasters.
There is evidence that changing patterns of extreme events are drivers for
recent increases in global losses.
Risk of change – Peter Höppe
The Munich Climate Insurance Initiative (MCII)
The MCII was founded by representatives of Germanwatch, IIASA, Munich
Re, the Potsdam Institute for Climate Impact Research (PIK), the Swiss
Federal Institute of Technology (SLF), the Tyndall Centre, the World Bank,
and independent experts.
MCII
Objectives
• Wealthy countries will be able to cope with financial losses from increasing
disasters by means of insurance solutions and state funding, the poorest countries
will suffer most
• The increasing natural catastrophe damages in poor countries will consume
increasing ratios of the donor money of development funding, delaying their
further development
• New insurance related systems are necessary to get these countries, where
currently almost no insurance is available, out of the global warming trap
• MCII is working on solutions to provide expertise on insurance related mechanisms
to cover losses due to climate change, especially in developing countries
Risk of change – Peter Höppe
Increase of corporate responsibility activities
in the field of climate change
Publications and strategic board game
Risk of change – Peter Höppe
Phases of Climate Strategies
Innovation Strategy
(also Adaption Strategy)
progressive
Integral climate and business strategy
Creating new chances of business
Mitigation Strategy
Minimising and excluding climate
related business risks
Compliance Strategy
Obeying the legal preconditions
Defense Strategy
Temporal course
Ignoring/denying climate risks
of development
defensive
80s
90s
today
Source: Schaltegger after WWF 2006
Risk of change – Peter Höppe
Conclusions
 Natural catastrophes, especially weather related events, are
increasing dramatically in number and magnitude. Loss
potentials have reached new dimensions
 Climate change is happening already, it cannot be stopped
anymore, just attenuated
 There is more and more scientific evidence for causal links
between global warming and increasing frequencies and
intensities of natural catastrophes
 The insurance industry has to consider climate change in its risk models
 We have to mitigate global warming and adapt to the changing risks in
respect to the regionally specific risk patterns
Risk of change – Peter Höppe
Thank you very much for your attention
Alexander Milberg