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Climate change

One of humanity’s greatest challenges – Our approach

Climate change, predominantly the result of human activity, is real and has a major influence on weather-related natural disasters. It can dramatically alter a region’s risk situation in terms of severe storms, thunderstorms, floods or droughts. A thorough understanding of climate change is essential for an insurer's risk management.

Munich Re is a pioneer in analysing the impacts of anthropogenic global warming and natural climatic variability on losses caused by weather-related natural disasters. For the past four decades, we have researched risks, loss prevention measures and new risk transfer solutions. In addition, we examine long-term data on meteorology and losses to better understand changes in risk. 

Climate crisis alters the risk landscape

The consensus among scientists is that the emissions of anthropogenic greenhouse gases since industrialisation began are the main cause of rising temperatures in our planet’s atmosphere and oceans. Global warming has various consequences. 

Sea ice and glaciers are melting. Sea levels are rising, currently at an annual average of some 3 mm.  

Higher temperatures – and the correspondingly higher energy content in the atmosphere – change the probability distributions of individual meteorological parameters and weather patterns. This is especially significant from a risk perspective.

If weather extremes occur more frequently and/or become more intense, then there will be more losses – unless measures are implemented to minimise losses. Construction engineering measures come to mind, as do changes in land use. 

It is very probable that climate change has played a role in severe hailstorms in North America and Europe, wildfires in California and heatwaves in many places.

Referred to as hurricanes, typhoons or cyclones in different parts of the world, more and more tropical cyclones have brought extreme precipitation in recent years. There are also signs that particularly severe storms account for a rising percentage of all storms.  

Individual loss events cannot be attributed directly to climate change. Nevertheless, the analysis of long-term trends on the basis of meteorological data – in combination with underwriting and socio-economic data – provides key indications of the changing risk from dangerous storms.

Climate change and greenhouse gases: A simple explanation of a complex process

Decisive action needed

The repercussions of the climate crisis directly affect the insurance industry. Weather extremes cause crop losses as well as considerable damage to buildings and infrastructure. There are two main challenges:

Recognising changes in catastrophe risks

Here the focus is on first identifying risks of change in insurance and investments. Experts then develop solutions for loss minimisation, risk transfer and the management of investment portfolios.

Slowing the pace of climate change

The climate crisis means that decisive action is essential to keep global warming well below an increase of 2°C compared with pre-industrial levels. In fact, the international community defined this objective in the Paris Agreement of 2015, under the auspices of the United Nations. Achieving this target requires new technologies for power generation, transportation, energy storage and industrial production. We therefore focus on crafting insurance solutions for such technologies, smoothing the path to market entry.

Solutions for assessing and managing risks

Munich Re has traditionally focused on covering peak risks associated with natural disasters. In the interest of facilitating adaptation to climate change and fostering climate-friendly technologies, we both drive forward initiatives on loss minimisation and prevention, as well as develop innovative risk transfer solutions. More widely available insurance covers, particularly in emerging and developing countries, can make it easier for countries and individuals to handle the financial impact of natural disasters.

Reinsurance solutions

Industry solutions

Contact our experts
Ernst Rauch Portrait
Ernst Rauch
Chief Geo & Climate Scientist
Climate Change Solutions Department