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Climate change and its consequences

Natural disasters are becoming more frequent and more severe

Climate check podcast

Munich Re experts share ideas on expanding climate resilience.

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    Climate change is real and is influencing weather-related natural disasters. The risk situation is changing depending on the region and the natural hazard in question, for example tropical cyclones, thunderstorms, floods or droughts. Insurers need to fully understand these changes for their own risk management purposes.
    For five decades, Munich Re has been analysing the effects that global warming and natural climate variations have on weather-related natural disasters. We focus on the risks involved as well as on loss prevention and new risk transfer concepts. We make use of long-term meteorological and loss data to understand changes in risk and to adjust our risk models accordingly. With this expertise, we can continue to provide our clients with the usual level of risk capacity.

    What is the impact of climate change on the risk?

    The current scientific consensus is that human greenhouse gas emissions since the industrial revolution are overwhelmingly responsible for rising temperatures in the atmosphere and oceans. The consequences of global warming are many and varied.

    Sea ice and glaciers are melting, and the sea level is rising, currently at an average rate of around 3 mm per year.

    Higher temperatures result in greater evaporation, which adds to the energy content in the atmosphere. The probabilities for individual meteorological parameters and weather patterns are changing – something that is especially relevant from a risk perspective.

    If weather extremes become more frequent and/or more intense, losses will increase unless specific mitigation measures are implemented. These could include structural engineering measures or more stringent land-use regulations.

    There is scientific evidence for the influence of climate change on severe thunderstorms with hail in North America and Europe, on wildfires in California, and on heatwaves and droughts.

    In recent years, tropical storms (called hurricanes, typhoons or cyclones depending on the region where they occur) have been accompanied by increasingly extreme precipitation. There are also indications that the proportion of especially severe storms is rising.

    Individual loss events cannot be attributed to climate change alone. However, the analysis of long-term trends in meteorological data, in conjunction with underwriting and socio-economic data, provides important information on the changing risks emanating from weather hazards.

    Climate change and greenhouse gases – a simplified explanation of a complex process

    Climate change is bringing more energy into the atmosphere
    © Munich Re

    Decisive action required

    The insurance industry is directly affected by the consequences of climate change. Weather extremes result in higher levels of damage to buildings and infrastructure, as well as in crop shortfalls in agriculture. Essentially, there are two main challenges: 

    Firstly, the crucial question to be answered is whether and how risks in insurance and investment are changing. The next step would then be to develop loss mitigation solutions in the form of risk transfer through insurance and portfolio management for investments.


    The importance of the Paris climate targets in the fight against climate change 

    Climate change makes decisive action absolutely essential in order to limit global warming to significantly below 2 °C, and if at all possible to 1.5°C, compared with the pre-industrial global temperature level. This is also the goal of the international community and was thus enshrined in the Paris Agreement in 2015, under the auspices of the United Nations, in order to limit the negative impact of climate change. In many regions, increased warming of the atmosphere and oceans has serious consequences for the environment and society: stronger storms, droughts, floods, seal-level rise. Besides direct physical damage from natural disasters, these in turn also lead to long-term impacts on agriculture and species diversity.

    Projections from scientific climate models indicate that warming of 1.5 degrees will be reached or even exceeded in this decade or the next if no effective measures are taken to reduce greenhouse gas emissions.

    The last ten years were the ten warmest ever. And this despite the fact that some of those years (2020-2022) were characterised by a so-called La Niña phase – of the natural ENSO climate oscillation – which tends to have a cooling effect on global temperature. With the opposite effect – a so-called El Niño phase, like in 2023 –, temperatures usually turn out to be noticeably higher.


    Curbing climate change

    New technologies in the fields of power generation, transport, energy storage and industrial production are needed to limit global warming. The focus for us therefore is on devising insurance solutions for these technologies in order to facilitate their market entry.


    Solutions for the assessment and management of risks

    Munich Re’s traditional focus has been on covering peak risks from natural disasters. In order to ease adaptation to the already inevitable consequences of climate change and to support climate-friendly technologies, we are driving loss mitigation and prevention initiatives and developing innovative risk transfer solutions. A wider distribution of insurance covers, particularly in emerging and developing countries, can help people in these regions cope more effectively with the financial consequences of natural disasters.

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    Ernst Rauch Portrait
    Ernst Rauch
    Chief Geo & Climate Scientist
    Climate Change Solutions Department