Category Archives: Disaster Resilience

Climate Change Tops Risk List

Climate change is the greatest strategic risk that insurance industry leaders must manage if they are to maintain dominant competitive positions. A new study from Ernst & Young and Oxford Analytica puts climate change at the top of the strategic risk list for insurers, followed by demographic shifts in core markets (a priority for life insurers) and catastrophic events. The study’s findings were based on interviews with more than 70 industry analysts around the world. The analysts also identified five emerging risks, just outside the top 10, with the potential to become as significant during the next five years. These are: over reliance on model-based risk management; threats to industry reputation; losing the war for talent; increasing exposure to global regulatory heterogeneity; and the possible emergence of entirely new risks. Are you surprised by the findings? Check out Insurance Journal’s March 12 online article for more information on the study.

Environmental Inaction Costly

Act now or the costs of addressing key environmental issues will increase significantly. That’s the message from the Organization for Economic Cooperation and Development (OECD) in its Environmental Outlook to 2030. The report identifies four priority areas where urgent action is needed: climate change, biodiversity loss, water scarcity and the impacts on human health of pollution and toxic chemicals. It highlights a mix of policies that can address these challenges in a cost-effective way. By 2030, world GDP is projected to nearly double from today’s levels. The OECD analysis shows that it would cost just over 1 percent of that growth to implement policies that can cut key air pollutants by about one third, and contain greenhouse gas emissions to about 12 percent, instead of 37 percent growth under the scenario without new policies. OECD also recommends use of market-based instruments, such as green taxes, efficient water pricing, emissions trading and polluter-pay systems. However, more stringent regulations and standards, such as for transport and building construction, are also needed.

Human Toll on Seas

Large areas of the east coast of North America and the Caribbean Sea are among the oceans in the world most heavily affected by human activities. That’s the upshot of a global study from the University of California at Santa Barbara this week. According to its findings, more than 40 percent of the world’s oceans are heavily affected by human activities, such as fishing, climate change and pollution, and few if any areas remain untouched. By overlaying 17 different maps of human activities, researchers came up with a composite map of the toll exacted by humans on the seas. Other ocean areas most severely affected include the North Sea, the South and East China Seas, the Mediterranean Sea, the Red Sea, the Persian Gulf, the Bering Sea, and several regions in the western Pacific. The least affected areas are largely near the poles.

Climate Compromise?

As the United Nations Climate Change Conference in Bali enters its final day, a scan of the news headlines suggests the U.S. and Europe may be able to reach compromise on targets to reduce greenhouse gas emissions. The UN’s World Meteorological Organization (WMO) this week released a report saying that the decade from 1998-2007 was the warmest on record. Preliminary data compiled by WMO in the report also  indicates that 2007 will be the seventh warmest year on record. Whatever the outcome in Bali, the latest reports continue to point out that climate change  represents a key risk for countries, governments, businesses and individuals moving forward.  

Coastal Flooding Exposure

Hot on the heels of yesterday’s posting about modeling and as the UN Climate Change Conference continues in Bali, the release of a global study on coastal flooding by the OECD, RMS and the University of Southampton is timely. The study makes a first estimate of the exposure of the world’s largest port cities to coastal flooding due to storm surge and damage due to high winds. It also investigates how climate change is likely to impact each port city’s exposure to coastal flooding by the 2070s, alongside subsidence and population growth and urbanization. The upshot is that the total population  reliant on flood defenses  could more than triple from 40 million today to around 150 million people by 2070. In the same period, total assets exposed will grow even more dramatically, more than 10 times current levels reaching $35,000 billion. The findings are ominous for a number of U.S. cities, with Miami topping the list in terms of assets exposed to coastal flooding ($416.3 billion today and increasing to $3,513 billion by the 2070s). New York-Newark places third with exposed assets of $320.2 billion, rising to $2,147 billion by the 2070s. New Orleans ranks 12th, with $233.7 billion in exposed assets, rising to $1,013 billion by the 2070s, while Virginia Beach ranks 19th, with $84.6 billion in current exposed assets, increasing to $581.7 billion by the 2070s. How to put in place effective climate change policies and disaster management strategies are just some of the challenges the study highlights. Check out I.I.I. facts & stats on flood insurance.

UN Climate Change Talks and Initiative

The United Nations Climate Change Conference in Bali got underway today. The two-week long conference brings together representatives from more than 180 countries and observers from intergovernmental and nongovernmental organizations as well as the media. A key goal of the conference is to work towards a deal to replace the Kyoto Protocol which expires in 2012. Ahead of the Bali meeting, insurers AIG, Allianz, AXA, and Swiss Re were among 150 companies to have signed the Bali Communique on Climate Change, a call to world leaders for a comprehensive, legally binding United Nations framework to tackle climate change. This initiative has been led by the Prince of Wales’s Corporate Leaders Group on Climate Change and the University of Cambridge.  

UN Climate Change Convention

Top officials from more than 150 countries gather at United Nations HQ in New York City today, to address the leadership challenge of climate change. The event, billed as the largest meeting ever of world leaders on climate change, takes place on the eve of the opening of the UN General Assembly’s annual General Debate. The discussion is intended to build momentum for the UN Climate Change conference in Bali this December where negotiations about a new international climate agreement should start. Sessions will cover adaptation, mitigation, technology, and financing. For our industry’s part, Jacques Aigrain, chief executive officer and member of the executive board committee of Swiss Re, will be speaking.  

U.K. Climate Initiative

We bring the week to a close by noting that a number of leading insurers and industry organizations (38 at last count) have signed on to a U.K. initiative aimed at addressing climate change. Known as the ClimateWise Principles, the initiative has been launched by the Association of British Insurers (ABI). It was developed following discussions between insurers and HRH the Prince of Wales. The principles commit insurers that sign up to: lead the way in analyzing and reducing risks; support climate awareness among their customers; incorporate climate change into their investment strategies; inform and engage in public policy debate; and reduce the environmental impact of their businesses. Specifically, insurers will be required to incorporate climate risk into their business strategy and planning, and to publish a statement as part of their annual report detailing the actions that have been taken in support of the principles. Check out more on this at:Â  

Climate Mitigation Technology

It’s been a big week in the Big Apple for climate change, with a number of key initiatives unveiled at the C40 Large Cities Climate Summit 2007. First, the announcement of a major partnership between 16 of the world’s largest cities, five banks, four multinationals and the Clinton Foundation to retrofit buildings in urban areas and reduce carbon emissions. Funded by a hefty $1 billion from the banks it’s hoped the use of more energy efficient products in retrofitting existing buildings will lead to energy savings of 20 to 50 percent. A second initiative announced yesterday will see Microsoft team up with the Clinton Foundation to develop online tools to help cities more accurately monitor, compare and reduce their greenhouse gas emissions. These new software tools, available by year-end, will be developed in conjunction with the ICLEI – Local Governments for Sustainability, and the Center for Neighborhood Technology. The idea is for Microsoft to develop a single Web solution to allow cities to clearly understand their environmental footprint so they can improve their energy efficiency and reduce carbon emissions. An interesting step. For our industry’s part, the Summit included a speech by Swiss Re’s Roger Ferguson, who spoke of a public/private partnership approach to climate change.  

Mitigating Climate Change

Tomorrow the UN’s Intergovernmental Panel on Climate Change (IPCC) will release its latest report on climate change. This, the third and final IPCC volume for the year, will focus on mitigation of climate change. Among other things, it is expected to highlight how various economic steps and technologies could help limit the effects of global warming. Measures to reduce greenhouse gases and the costs associated with such action will also be weighed. Whatever its conclusions and recommendations, the report again indicates that climate change represents a key risk for countries, governments, businesses and individuals moving forward. Bear in mind a recent survey from the Economist Intelligence Unit (EIU), and sponsored by ACE, IBM and KPMG, revealed that international risk managers were least confident about how their organizations were managing climate change risk. Interestingly, survey respondents also felt that terrorism risks and human capital risks are not being handled so well.