WIN Magazine - Spring 2012 - (Page 16)
THE IMPACT OF CLIMATE CHANGE
ANY ARTICLES HAVE been written on the issue of weatherrelated changes and their socioeconomic impact. Wholesale Insurance News spoke with Ernst Rauch, head of Munich Re’s Corporate Climate Centre, to obtain his views on what lies at the core of the issue, and the specific implications for the insurance industry. WIN: What is causing the increase in weatherrelated events, and do you expect them to continue? Rauch: A review of all weather-related events since 1980 shows that to date the number of worldwide weather-related catastrophe events has increased roughly threefold. It is likely that the increase in values at exposed sites has contributed to this development. It also cannot entirely be ruled out that the improved quality of observation is reflected in this upward trend, although we invest significant resources to quality control our data and to eliminate artificial biases. However, even after adjusting the data to take account of the smaller upward trend, as it appears also in connection with geophysical events despite an objectively unchanged hazard situation, there is still a more than twofold increase in weather-related natural catastrophes as against the 1980 average. We believe climate change is a fact, based on today’s available scientific studies. And climate change is almost entirely driven by man. There are many indications that climate change is partly responsible for the rise in severe weather-related natural disasters because the weather machine is running in overdrive. Losses caused by weather-related natural catastrophes have also risen remarkably since 1980. In our view, although much of this increase is due to socio-economic factors, it can already be attributed in part to climate change brought about by human activity. Losses caused by extreme weather events are likely to rise significantly in the future. WIN: How are insurers generally, or Munich Re in particular, changing risk evaluations or actuarial models/projections to incorporate the climatological events of the past year(s) and better prepare for 16 | v i e w t h i s i s s u e a t | www.aamgawin.org
An Interview with Ernst Rauch, Head of Munich Re’s Corporate Climate Centre
2011: YEAR OF THE TORNADO * Deadliest tornado year since 1925: 552 direct fatalities * Deadliest single tornado since 1947: Joplin, Mo., 158 fatalities * Most observed tornadoes in a month: 748, April * Largest number of tornadoes in a day: 226, April 27 * Most EF5 tornadoes in a year: 6 (tied for first with 1974) * Aggregate Insured Thunderstorm Losses: $25.8 billion * Billion-dollar insured loss outbreaks: 6 * Late April (Alabama) and May (Joplin) outbreaks each caused insured losses in excess of $6 billion and are among top 10 largest natural catastrophe losses in U.S. history, based on original dollars.
© 2011 MunichRe, U.S. Natural Catastrophe Update
pricing, capacity and underwriting considerations going forward? Rauch: At Munich Re, we look closely at a multitude of risks and how best to handle them. Risks of change, i.e. risks that change in the course of time, are especially hazardous. Climate change is such a risk. As a leading global risk-carrier, we cannot run our business operations by waiting for 100 percent scientific certainty – we have to act earlier. Most scientific studies confirm the effects of climate change and the fact that it makes economic sense to take action to deal with it. As climate change is a long-term trend with possible consequences evolving over time and not suddenly, this might not lead to abrupt changes in the underwriting strategies of insurers. We are aware of this risk of change and will make sure that our prices and conditions are commensurate with the risks. We also see significant business opportunities, for instance, from new insurance solutions for technologies to tackle climate change. Examples are risk transfer solutions for renewable energies such as complex offshore wind parks, geothermal energy drilling projects or the performance of photovoltaic power plants.
Table of Contents for the Digital Edition of WIN Magazine - Spring 2012
Cover Story: The Catlin Arctic Survey: How an Insurer Decided to be in the Forefront of Environmental Research
The Year in Review: Natural Catastrophes in 2011
The Impact of Climate Change: An Interview with Ernst Rauch
Wholesale Agents & Insurers Embrace Tablets
Technology@Lloyd’s: Closing the Gap in 2012
A Unique Perspective: An Insight on the Technology Transformation
An Email Commentary: Liability Exposures and How to Prevent Them
Marketing on the Internet: New Opportunities for Wholesale Insurance Agents
Applying “Moneyball” Principles to General Agencies: How Much Value is Trapped Within the Back Office?
IN THE WIN-NER’S CIRCLE: A Discussion with Tom Kuzma
INDEX TO ADVERTISERS / ADVERTISERS.COM
WIN Magazine - Spring 2012