Entries tagged with “Climate Change”.


As world leaders gather to discuss climate change at the United Nations this week, a new report from the Global Reinsurance Forum (GRF) says risk prevention and mitigation measures as well as risk transfer are the key to managing this threat.

According to the report, up to 65 percent of climate risks can be averted by adaptation measures including infrastructure development, technology advancements, shifts in systems and behaviors such as improved building codes and land use management, and financial measures.

The global re/insurance industry plays a vital role in planning and implementation of such measures. As the GRF says:

Future insurability will depend on well-planned adaptation: without it, property insurance will become less affordable and less accessible.

The world cannot simply insure its way out of the effects of climate change, but adaptation allows the global burden of potential loss to be reduced and shared, helping to keep the most vulnerable from being overwhelmed.”

The report points out that the reinsurance industry is particularly exposed to the impact of climate change given its role as an ultimate destination of risk:

The industry identified climate change as an emerging risk more than twenty years ago; it has since become a key component of every company’s long-term risk management strategy.”

Citing a 2012 IPCC report, the GRF notes that extreme weather events, such as storms, floods, droughts, heat waves as well as rising sea levels, crop failures and water shortages have become more numerous and severe.

Reinsurers can make an important contribution by developing protection and mitigation-finance solutions to address the specific challenges that climate change presents.

At the same time, the GRF says reinsurers are advancing understanding of climate change-related risk through the development of natural catastrophe models and via collaboration with universities and scientific institutions. They are also monitoring relevant phenomena such as urbanization, population concentration, property and commercial activity in high-risk areas along the coasts and flood plains.

Check out a great I.I.I. backgrounder on climate change and insurance issues here.

An article in The New York Times over the weekend gave a frightening account of the ongoing severe drought across California that is now threatening the state’s water supply.

As farmers, ranchers and homeowners brace for what could be the state’s worst drought in 500 years, The NYT reports that the snowpack in the Sierra Nevada, which supplies much of California with water during the dry season, was at just 12 percent of normal last week, reflecting the lack of rain or snow in December and January.

The NYT quotes Tim Quinn, executive director of the Association of California Water Agencies, saying:

We are talking historical drought conditions, no supplies of water in many parts of the state. My industry’s job is to try to make sure that these kind of things never happen. And they are happening.”

The latest U.S. Drought Monitor, published last Thursday, put 9 percent of the state of California into “Exceptional Drought” – the worst possible category of drought. According to Dr. Jeff Masters’ WunderBlog this is the first time since the Drought Monitor product began in 2000 that a portion of California was put into “Exceptional Drought.”

Meanwhile, parts of the state experiencing “Extreme Drought,” the second worst category of drought, increased to 67 percent.

The U.S. Drought Monitor notes that a few of the impacts within the “Exceptional Drought” areas include fallowing of land, wells running dry, municipalities considering drilling deeper wells, and little to no rangeland grasses for cattle to graze on, prompting significant livestock sell off.

Over at Slate.com Eric Holthaus says that puts the current California drought on par with recent major droughts in Texas (2010-11) and the Midwest (2012), both of which were multibillion-dollar disasters.

For insurers, droughts can be costly too. According to analysis by Munich Re, drought in various parts of the U.S. in 2012 caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

Check out I.I.I. information on crop insurance.

Climate change is among the five most likely and most potentially impactful global risks, according to the just-released World Economic Forum (WEF) 2014 Global Risks Report.

The report assesses 31 risks that are global in nature and have the potential to cause significant negative impact across entire countries and industries if they take place.

An analysis of the five risks considered most likely and most impactful since 2007 shows that environmental risks, such as climate change, extreme weather events and water scarcity, have become more prominent since 2011 (see chart above).

This suggests a pressing need for better public information about the potential consequences of environmental threats, the WEF says.

Concern about socio-economic risks such as income disparity, unemployment and fiscal crises has become more prominent over the years.

The report reveals that fiscal crises and structural unemployment and underemployment are among the most impactful risks while the latter also feature among those most likely to occur. This has knock-on effects on income disparities, which is regarded as the overall most likely risk, the WEF notes.

Cyber attacks and the breakdown of critical information infrastructure also feature among the most prominent risks in this year’s report.

The WEF notes:

This arguably reflects the increasing digitization of economies and societies, where rising dependence on information and data, as well as the systems to analyze and use them, has made attacks more likely and their effects more impactful.”

WEF note: Global risks may not be strictly comparable across years, as definitions and the set of global risks have been revised with new issues having emerged on the 10-year horizon. For example, cyber attacks, income disparity and unemployment entered the set of global risks in 2012. Some global risks were reclassified: water supply crises and income disparity were reclassified as environmental and societal risks, respectively, in 2014.

The report is published in collaboration with Marsh & McLennan Companies, Swiss Re, Zurich Insurance Group, National University of Singapore, Oxford Martin School, University of Oxford, Wharton Risk Management and Decision Processes Center, University of Pennsylvania.

With two months to go to the one-year anniversary of Hurricane Sandy, a federal task force created after the storm has issued a report that’s getting a lot of media coverage.

The plan includes 69 policy initiatives, of which a major recommendation is to build stronger buildings to better withstand future extreme storms amid a changing climate.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, and chair of the task force, notes:

Last year alone, there were 11 different weather and climate disaster events across the United States with estimated losses exceeding $1 billion each. We know that every dollar we spend today on hazard mitigation saves us at least $4 in avoided costs if a disaster strikes again. By building more resilient regions, we can save billions in taxpayer dollars.”

The report makes clear that rebuilding to outdated standards is no longer an option given the impact of climate change and rising sea levels:

No single solution or set of actions can anticipate every threat, but decision makers at all levels must recognize that climate change and the resulting increase in risks from extreme weather have eliminated the option of simply building back to outdated standards and expecting better outcomes after the next extreme event. There is clear evidence at the national level that investments made to mitigate risk have achieved significant benefits.”

One section of the plan focuses on addressing insurance challenges, understanding and affordability.

Specifically, the taskforce recommends: streamlining payouts to policyholders in the wake of disaster; improving policyholder awareness of factors that affect flood risk and insurance rating decisions; and studying affordability challenges of flood insurance as the National Flood Insurance Program (NFIP) transitions toward full risk rates.

PC360 has more on this story.

Check out I.I.I. facts and statistics on flood insurance here.

We start the week with a new animation from NASA that shows the increasing risk of wildfire activity across the United States in the coming decades.

An article on the NASA website notes that with satellite and climate data, scientists have been able to track an increase in dry conditions since the 1980s.

Climate projections suggest this trend will continue, increasing the risk of fire in the Great Plains and Upper Midwest by the end of the 21st Century, according to NASA.

NASA explains:

The newest generation of climate models project drier conditions that likely will cause increased fire activity across the United States in coming decades. These changes are likely to come in a number of different forms, including longer fire seasons, larger areas at risk of wildfire, and an increase in the frequency of extreme events – years like 2012 in the western United States.”

Fire seasons are starting earlier due to warmer spring temperatures and earlier snowmelt, and they are lasting longer into the fall, NASA notes.

It cites NIFC statistics indicating that 100,000-acre wildfires are becoming increasingly frequent.

Here’s the animation:

Hat tip to CNET for its blog post on this story.

Check out I.I.I. facts and statistics on wildfires, and a backgrounder on climate change insurance issues.

As we basked in 70 degree temperatures in parts of the Northeast on Sunday, just a few days in the wake of a nor’easter and nearly two weeks after Hurricane Sandy, it’s understandable that the topic of climate change is trending online.

In a post over at the Wall Street Journal’s Metropolis blog, Eric Holthaus asks the direct question: did climate change factor into recent storms?

He cites the connection between long-term sea level rise and the enhanced coastal flooding that devastated parts of Greater New York as evidence of a much clearer link between Sandy and climate change.

New York Harbor’s average water level is now 12 to 18 inches higher than it was in the 1880s, Holthaus says, and scientists estimate about 8 to 12 inches of that is a direct result of global warming. So, more people were affected in the tri-state during Hurricane Sandy than would have been if the same storm had struck in a world without climate change.

He concludes:

For the victims of Hurricane Sandy, it may come as little consolation, but history may show them to be—with absolute certainty—among the first people in the United States directly affected by climate change.”

In another post over at Scientific American’s Observations blog, Mark Fischetti writes that scientists, journalists and even insurers are starting to drop the caveats, and simply say that climate change is causing big storms.

Fischetti suggests that as scientists collect more and more data over time, more of them will be willing to make the same data-based statements.

A recent study by Munich Re reported that North America was most affected by the rising number of natural catastrophes. Specifically, it noted a nearly five-fold increase in the number of weather related loss events in North America for the past 30 years, compared with an increase of 4 in Asia, 2.5 in Africa, 2 in Europe and 1.5 in South America.

In a press release announcing the study, Munich Re said:

Climate change particularly affects formation of heat-waves, droughts, intense precipitation events, and in the long run more probably also tropical cyclone intensity. The view that weather extremes are becoming more frequent and intense in various regions due to global warming is in keeping with current scientific findings…”

Munich Re added:

Up to now, however, the increasing losses caused by weather related natural catastrophes have been primarily driven by socio-economic factors, such as population growth, urban sprawl and increasing wealth.”

Check out I.I.I. information on climate change and insurance.

A new study by NOAA and UK Met Office scientists makes the link between global warming and extreme weather events.

The paper, Explaining Extreme Events of 2011 from a Climate Perspective, looks at six global extreme weather and climate events from 2011, including last year’s drought in Texas.

Key takeaways from the paper are:

– Determining the causes of extreme events remains difficult. While scientists cannot trace specific events to climate change with absolute certainty, new and continued research help scientists understand how the probability of extreme events change in response to global warming.

РLa Ni̱a-related heat waves, like that experienced in Texas in 2011, are now 20 times more likely to occur during La Ni̱a years today than La Ni̱a years fifty years ago.

– The UK experienced a very warm November 2011 and a very cold December 2010. In analyzing these two very different events, UK scientists uncovered interesting changes in the odds. Cold Decembers are now half as likely to occur now versus fifty years ago, whereas warm Novembers are now 62 times more likely.

– Climate change cannot be shown to have played any role in the 2011 floods on the Chao Phraya River that flooded Bangkok, Thailand. Although the flooding was unprecedented, the amount of rain that fell in the river “catchment” area was not very unusual. Other factors, such as changes in reservoir policies and increased construction on the flood plain, were found most relevant in setting the scale of the disaster.

The New York Times has more on the study findings.

Release of the study comes along with NOAA’s 2011 State of the Climate report which found that worldwide 2011 was the coolest year on record since 2008, yet temperatures remained above the
30 year average.

NOAA’s climate report also provides details on a number of global extreme events from last year, including the Thailand floods, drought and tornado outbreaks in the U.S., floods in Brazil and the summer heat wave in central and southern Europe.

In the words of Deputy NOAA Administrator Kathryn Sullivan:

2011 will be remembered as a year of extreme events, both in the United States and around the world. Every weather event that happens now takes place in the context of a changing global environment. This annual report provides scientists and citizens alike with an analysis of what has happened so we can all prepare for what is to come.”

Check out information from the Insurance Information Institute (I.I.I.) on climate change and insurance.

As wildfires continue to burn in Colorado, New Mexico, Utah, Wyoming and Arizona, we read that U.S. Forest Service chief Tom Tidwell is renewing his call to restore forests to a more natural state in which fire was part of the landscape.

The Associated Press reports that the Forest Service’s plan is to set the clock back to zero, accelerating restoration programs – including prescribed fires and mechanical thinning – by 20 percent each year in key areas that are facing the greatest danger of a catastrophic fire.

According to AP, four million acres are being targeted this year with a $1 billion budget.

Meanwhile, a new report from scientists at the University of California at Berkeley and Texas Tech University says that climate change will cause more wildfires across North America and Europe in the next 30 years.

The study used 16 different climate models to generate its results. Risk Management Monitor has more on its findings.

And a new climate analysis from NOAA notes that the U.S. experienced its hottest spring (March-May) on record, with an average temperature of 57.1°F, 5.2°F above the 1901-2000 long-term average, surpassing the previous warmest spring (1910) by 2.0°F.

With the warmest March, third warmest April and second warmest May, Spring 2012 marked the largest temperature departure from average of any season on record for the contiguous United States, NOAA says.

In May, ongoing drought, combined with windy conditions, created ideal wildfire conditions across the Southwest.

NOAA notes that the Whitewater-Baldy Fire complex in the Gila National Forest of western New Mexico had charred over 210,000 acres by the beginning of June, surpassing 2011’s Las Conchas Fire as the largest wildfire on record for the state. The Whitewater-Baldy fire is still burning.

Check out I.I.I. facts and statistics on wildfires.

The Rocky Mountain Insurance Information Association (RMIIA) is a good resource for information on the Colorado wildfires.

Regular readers of our blog will remember a previous post on a public nuisance lawsuit brought by the Alaskan coastal town of Kivalina against 24 energy and utility firms.

Now a state appeals court has decided what is being described as the first climate change liability insurance coverage case – a case that arose out of the underlying public nuisance lawsuit – in favor of an insurer.

Late last week the Virginia Supreme Court upheld a lower court ruling that Steadfast Insurance has no duty to defend and indemnify the energy company AES Corp.

Basically the decision hinged on the definition of occurrence in the commercial general liability (CGL) insurance policies that AES purchased from Steadfast.

In the opinion, Justice S. Bernard Goodwyn noted that under the CGL policies in question, “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful condition.”

Justice Goodwyn wrote:

The relevant policies only require Steadfast to defend AES against claims for damages for bodily injury or property damage caused by an occurrence or accident.”

However, the Kivalina complaint had alleged that AES intentionally emitted carbon dioxide and other greenhouse gases into the atmosphere.

Justice Goodwyn further noted:

Kivalina alleges its damages were the natural and probable consequence of AES’s intentional actions. Therefore, Kivalina does not allege that its property damage was the result of a fortuitous event or accident, and such loss is not covered under the relevant CGL policies.”

According to an article in the New York Times by Lawrence Hurley of Greenwire, legal experts caution that this initial opinion in favor of insurers is just one decision that applies to only one state and one insurance policy.

A post at the ClimateLawyers blog states:

This is the first skirmish of what is certain to be a protracted battle between insurers and insureds. There are 50 other jurisdictions (including the District of Columbia) and this is only one issue based on one complaint and one insurer’s policy language. There is a long way to go before we will have clarity here.”

Check out the I.I.I. backgrounder on Climate Change Insurance Issues.

Regulation and financial stability will be key issues for the insurance industry in 2011, according to international insurance think tank, The Geneva Association.

Hat tip to Business Insurance for more on this story.

Patrick Liedtke, secretary general and managing director of the Geneva Association, observed that the direction of international insurance regulation is going to be critical for the industry this year.

Major regional projects such as Solvency II, which have gained reference status even beyond Europe, and global projects such as International Financial Reporting Standards (IFRS) reforms and International Association of Insurance Supervisors (IAIS) initiatives will see key decisions in 2011.”

Getting the next wave of regulation right is critically important, not only for the industry, but for continued economic growth and development, he said.

On financial stability, Liedtke noted that while systemic threats do not emanate from insurance activities there are a number of issues that remain poorly understood or simply have not been discussed but where important decisions will be taken by governments in 2011.

The key is to ensure that regulatory imprecision or over-stretch do not hamstring well-functioning industry and damage societal interests.”

Two longer term issues that are also of importance are climate change and demographics.

Climate change presents insurers with both long and far-reaching challenges and also opportunities. The shift towards longer life expectancy and ageing populations will change the way societies view risks.

Check out I.I.I. facts and stats on U.S. demographics and information on climate change and insurance.