Saturday, May 23, 2009

Counting the cost of catastrophe

The Free Internet Press has a profile of how Munich Re is handling climate change, via Ansbert Keip in Der Spiegel: How will the climate change affect us? What damage will be caused by future storms? What will be the impact of rising levels of obesity? Experts at Munich Re, one of the world's largest reinsurers, spend their days calculating what the future will hold.

…Hoppe works for Munich Re, one of the largest reinsurance companies in the world. Munich Re insures insurance companies - a fact that may sound paradoxical but makes perfect sense. Life insurance companies, automobile insurers and home insurers are likewise concerned that something bad might happen. A storm could rip thousands of roofs off of houses. Cellars could be flooded. Cars might be pulverized by hail storms. It's the kind of damage they must pay for, and if they are hit by a gigantic wave of claims, they'll need a reinsurance company to back them up - like Munich Re.

…Hoppe's division collects data from around the world, examines studies and writes its own. Munich Re has catalogued more than 26,000 "natural incidents" since 1970, from flooding in Bangladesh to hail showers in the foothills of the Alps. The company has little interest in dramatizing the dangers of climate change, nor would it be profitable to underestimate the phenomenon. Hoppe's employer simply wants to know what it will cost, both today and in the future.

… Munich Re thinks that even poorer countries like Bangladesh could eventually become customers as they seek to insure themselves against the consequences of global warming. The secretariat of the United Nations Framework Convention on Climate Change recently had Munich Re present a plan for how developing countries could insure themselves against the dangers of climate-related catastrophes. The countries responsible for global warming are to pay for the policies - the more CO2 a country emits into the atmosphere, the more they pay. Poorer countries would pledge to do what they can to limit damage, by not building settlements directly on the coast, for example.

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