Climate change – Putting knowledge to use, devising solutions

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Climate change – Putting knowledge to use, devising solutions

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

The current status of scientific knowledge shows that climate change is happening, and that it can only be mitigated by CO2-reduction measures. Our knowledge and our solutions aim to cushion the effects of climate change and help pave the way to a sustainable and low-carbon future.

The impact of climate change

The consequences of climate change are diverse and directly affect the insurance industry. The physical changes – in other words regional changes in weather patterns in terms of frequency and extent – are one of the consequences of great relevance to reinsurance. Scientific evidence is becoming increasingly clear that the magnitude of regional events such as heavy rainfall or severe thunderstorms is as growing as a result of climate change. Extreme weather events result in high material damage to buildings and infrastructure, as well as significant crop losses in agriculture. People are killed and injured, particularly in regions where risk prevention is still in its infancy. Moreover, the consequences of climate change are increasingly influencing political discourse and decisions. On the one hand, these consequences are connected with the regulation of carbon emissions and the relevant legislation and, on the other, with liability issues and safety aspects.

How high the cost of climate change turns out to be will depend on the approach taken to address it and on which measures are implemented for mitigation and adaptation. Many studies have endeavoured to estimate the cost of climate change, with very different results. For us as (re)insurers, it means analysing all aspects of climate change, be these the consequences physical and regulatory, or the associated changes in technology.

Our approach: Expertise and research

In the financial services and insurance sector, Munich Re is a pioneer in analysing the consequences of climate change. In the 1970s, Munich Re had already begun 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 part of a comprehensive scientific network that gives us access to the latest findings on natural catastrophes and 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 Munich Re. But they are also incorporated into tools for our clients, such as NATHAN Risk Suite, a web-based risk analysis tool for natural hazards, or the tool NatCatSERVICE, one of the world’s most comprehensive databases on natural catastrophes.

Our actions: Concrete and forward-looking

Climate change places special demands on us as a Group. In 2008, Munich Re developed a strategic approach that illustrates the subject in its entirety and bundles all of our knowledge and skills.
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 a team of experts led by Ernst Rauch, Head of Climate & Public Sector Business Development. Apart from conducting risk analysis, new risk transfer solutions are also developed here – particularly with regard to the public sector (public-private partnership solutions).

Concrete, forward-looking solutions

Our strategic approach covers both business-related activities and corporate responsibility measures. 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 identify the climate change risks that have a direct impact on our business model. Analysis and evaluation of the frequency and intensity of weather-related natural hazards is of great importance here, as is that of 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 growth areas for our Group in connection with mitigation and adaptation.

Investment management

As a Group, we invest our capital in a responsible manner, and contribute, for example through investment, to reducing carbon emissions. Changing political and regulatory framework conditions, for example in the energy and carbon markets, are also generating new opportunities in the field of asset management. We have been investing for a number of years in renewable energies and infrastructure projects, providing private-sector capital to finance infrastructure measures.

Carbon neutrality strategy

We also take a concrete and forward-looking approach in our Group strategy. Munich Re advocates effective and binding rules on carbon emissions not only internationally, but also internally within the Group. Business operations throughout our Group have been carbon-neutral since 2015. This is possible thanks to our internal environmental management system which enables us to continually improve our carbon footprint and emissions balance.

Involvement in climate initiatives

For many years, Munich Re has played an active role in a range of national and international climate protection organisations such as the United Nations Environmental Programme and as a board member of the Global Climate Forum. With our expertise, we are a valuable partner for political decision-makers, organisations and other enterprises.

Emerging and developing countries are particularly affected by climate change. At the initiative of Munich Re and representatives from the World Bank, NGOs and the scientific community, the Munich Climate Insurance Initiative (MCII) was established in 2005 as a charitable organisation with a secretariat at 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 world climate negotiations (COPs) 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. Munich Re is also supporting the InsuResilience initiative. Founded in 2015 by the G7 countries, the initiative aims to enable an additional 400 million people in developing and emerging countries to access insurance products covering weather and climate risks by 2020.

You can find further information under the headings "Topics", "Sustainable solutions", "Key figures" as well as on the Munich Re website, in particular under the focus topic "Climate change".

GRI Content Index: G4-20; G4-21; G4-23; G4-EC2; G4-EC8; G4-EN27

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