Wednesday, January 21, 2009

Increasing weather losses: proof of climate change or not?

Lloyd’s: The string of natural catastrophes that wreaked havoc in 2008, costing the global economy $225 billion and leaving insurers with their second costliest year in history, graphically highlights the increasing risks to businesses of extreme weather events. Many companies are now grappling with the consequences of more frequent and more intense extreme weather events, such as hurricanes, tornadoes, floods and rainstorms.

…That the two most expensive years for insurers on record, according to research by Swiss Re, should come during the last four again spurs debate: is climate change already having an effect on our weather?…The fact that out of a total insured catastrophe bill of $50bn—the highest after 2005’s record year—storms account for the lion’s share, costing the industry $39bn, is evidence for some scientists and underwriters that global warming is already at work.

…“Tropical cyclone losses—or any weather-related losses in general—are linked to climate, which is simply defined as the weather averaged over 30 years,” David Bresch, Head of Sustainability and Emerging Risk at Swiss Re, says. For Bresch the rise in insured losses from natural catastrophes since the 1970s is mainly driven by the growth in insured values and the increased exposure in catastrophe-prone regions, such as Florida coastal areas.

“During any such period you will see quite a lot of variability in weather: the first decade you may not have many cyclones, the next decade you may see a lot, while the third phase may see an average number,” he says.

“So 2008’s high activity—and 2009’s forecast for further high activity—compared to the lack of activity in 2006 and 2007 can be explained in terms of climate variability”…. “Climate change is a fact. But in many regions there is not yet enough evidence to attribute local extremes of weather to global warming,” Bresch adds.

Although there is no consensus among insurers and scientists over whether the recent string of natural disasters are a definite signal of climate change, they all agree that climate change will occur and warn businesses to act immediately to protect themselves from an increased frequency and intensity of natural disasters.

Insurance has played an important role in providing protection to firms against the vagaries of the weather. “Insurance, particularly reinsurance, has, in the past, been key in absorbing huge risks that go across national borders. It has helped economies to rebuild themselves quickly after a big catastrophe,” Swiss Re’s Bresch says.

The Lloyd's building in London, shot by Chris Beach from Hadleigh, England, Wikimedia Commons via Flickr, under Creative Commons Attribution 2.0 License

No comments: