Climate change – Putting knowledge to use, devising solutions

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Putting knowledge to use, devising solutions

Increased flooding, heatwaves, droughts and severe storms: for over 40 years, Munich Re has been researching the changes in the frequency of weather-related loss events and has made use of this knowledge to understand weather and climate risks better, and to develop solutions for them.

The current status of scientific knowledge shows that climate change is happening and that it can only be mitigated by systematic carbon reduction measures. The most effective way would be the adoption of an ambitious international climate policy by as many countries as possible. While negotiations on a global climate agreement at a political level have made little progress, we as a company are taking action. Our knowledge and our solution strategies help cushion the effects of climate change and pave the way towards a sustainable and low-carbon future.

Climate change has diverse consequences: The physical changes, in other words regional changes in weather patterns in terms of frequency and extent, are one of the consequences that are of extreme relevance for reinsurance. Extreme weather events result in high material damage to buildings and infrastructure, as well as significant loss of revenue in agriculture. There are frequent casualties and victims in regions where risk prevention is still in its infancy. The consequences of climate change can also be of a regulatory kind. On the one hand, these are connected with the regulation of carbon emissions and accompanying laws, and on the other, with liability issues and safety aspects.

How high the cost of climate change will turn out to be will depend on the approach that is taken to it, and how the costs for mitigation and adaptation are distributed. Many studies have endeavoured to estimate the cost of climate change, with very different results. For us, it means analysing all the consequences of climate change, both physical and regulatory, as well as the changes in technology.

Peter Hoeppe - Munich Re

"Climate change is one of the greatest risks facing humankind this century. Through a part of its core business, the insurance industry is directly affected and therefore assumes a leading role in devising solutions for climate protection and adaptation to the inevitable changes."


Professor Peter Höppe, Head of Munich Re’s Geo Risks Research/Corporate Climate Centre

Our approach: Expertise and research
In the financial and insurance sector, Munich Re is a pioneer in analysing the consequences of climate change. In the 1970s, as part of geo risk research activities within the company, Munich Re began to investigate the causes behind increasingly costly losses from weather-related natural catastrophes, and to record the associated losses. Over the years, the complexity of the issues involved became increasingly clear as scientific advances were made. Today, we are integrated into a comprehensive scientific network that gives us access to the latest findings on climate change, and ensures a high level of quality for our analyses. The different findings from these analyses are consolidated on an ongoing basis and translated into relevant recommendations for action for the Munich Re Group. They are also incorporated into risk assessment tools for natural hazards, such as the NATHAN Risk Suite, which we provide to our clients.

Our action: Specific and future-oriented
Climate change places special demands on us as a company. In 2008, Munich Re developed a strategic approach that comprehensively maps the topics and bundles every aspect of our knowledge and skills. The Corporate Climate Centre was charged with implementation and development of this approach. In this Group-wide network, staff members research the consequences of climate change and work on pioneering concepts and product solutions.

At Munich Re, Dr. Torsten Jeworrek, Reinsurance CEO, is responsible for all insurance-specific matters relating to climate change. He is supported in this task by Professor Peter Höppe, Head of Geo Risks Research/Corporate Climate Centre, and by all the members of the Board of Management, departmental managers, and staff at the various units involved with products and questions relating to climate change.

Concrete, forward-looking solutions
In these efforts, we are continuously developing solutions for climate protection. Our strategic approach includes both business-related activities and measures in the context of our corporate responsibility. It comprises the following components:
 

Risk evaluation

As a company, we need to understand the business policy risks arising from climate change and adapt to its consequences. In risk evaluation, we determine the risks from climate change that have a direct impact on our business model. These include the analysis and evaluation of weather-related natural hazards, but also regulatory and technical changes with a direct influence on our insurance business and on our investment management.

Development of risk transfer solutions

One of our business objectives is to offer solutions. Through developing risk transfer solutions, we can make an active contribution to climate protection, firstly by cushioning the effects of climate change on natural hazards, and secondly by facilitating the introduction of climate-friendly technologies through our assumption of risks. Examples include the development of innovative insurance solutions in the field of technology (renewable energies, new technologies), as well as coverage concepts in the agriculture sector and protection against weather risks based on parametric triggers. This enables us to develop business growth areas for our company in connection with mitigation and adaptation.

Asset management

As a company, we invest our capital in a responsible way, and contribute, for example through investments, to reducing carbon emissions. Changing political and regulatory background conditions, e.g. in the energy and carbon markets, are also generating new opportunities in the field of asset management. For example, we have been investing for a number of years in renewable energies, providing private-sector capital to finance infrastructure measures.

Carbon neutrality strategy

In our Group strategy, we also take a concrete and future-oriented approach. Munich Re advocates effective and binding rules on carbon emissions not only internationally, but also internally within the Group. Business operations throughout our Group are to be made carbon-neutral by the end of 2015, based on our internal environmental management system, which enables us to continually improve our carbon footprint and emissions balance.

Involvement in climate initiatives

For a number of years, Munich Re has played an active role in a range of national and international climate protection organisations, such as the United Nations Environmental Program, and as a board member of the Global Climate Forum. We are convinced that, with our expertise, we are a valuable partner for political decision-makers, organisations and companies.

One group particularly affected  by climate change is that of emerging and developing countries. The Munich Climate Insurance Initiative (MCII) was established in 2005, at the initiative of Munich Re and representatives from the World Bank, NGOs and the scientific community, as a charitable organisation with a secretariat in the United Nations University in Bonn. The underlying idea was to support adaptation to climate change in developing countries through providing insurance-related risk management mechanisms. Since then, MCII has contributed suggestions on risk management to climate negotiations and provided technical support in the discussions on dealing with losses from climate change under the UNFCCC "Loss and Damage" programme and the "Warsaw International Mechanism".

You can find further information under the headings "Management", "Solutions", "Facts and figures", as well as on the Munich Re home page, particularly under the focus topic Climate change.


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