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Droughts and heatwaves:
Gradual but catastrophic

The consequences of drought and extreme heat are more devastating and dangerous than they may first appear

Heat and dry weather — An explosive combination

Agriculture and forestry are not the only areas to feel the impact of heatwaves and droughts. These extreme conditions also pose a danger to life and health and cause material damage and business interruption. Shipping and energy are also among the areas of industry affected, for instance if river water levels drop or power plants have to be shut down due to a lack of cooling water. Extreme heat can also have a negative impact on tourism. The insurance sector has seen one particular issue grow in significance in recent years — the increased risk of wildfires.

Drought — The underestimated natural hazard

16.5
US$ bn
The "Camp Fire" in California was the costliest natural disaster in 2018 and the most destructive forest fire of all time - Insurers paid out US$ 12.5bn

Data from Munich Re's NatCatSERVICE database indicates a clear long-term trend towards an increase in droughts. While there were around ten loss-relevant events per year in the early 1980s, the number in recent years has been twice as high.

Based on scientific studies, the Intergovernmental Panel on Climate Change (IPCC) believes that global warming will see many regions of the world experience an increase in heatwaves and droughts. If there is a further increase in greenhouse gas emissions, by the middle of the century we could see heatwaves previously likely only every twenty years occurring every two to three years in the American Midwest, and even in central Europe. In Southeast Asia, such conditions could even be likely every one to two years.

As a result, droughts will become an extremely costly natural hazard over the coming decades, presenting a serious risk to the global food supply as a result of crop failures and a higher incidence of plant disease.

Droughts and heatwaves can have wide-reaching consequences

Droughts have a major impact on agriculture, with consequences including crop shortfalls, a higher incidence of plant disease and even total crop failure. These situations can ultimately lead to famine. During prolonged or frequently recurring periods of drought, the ground and flora become so badly damaged that the land is turned into desert. Measures to curb this effect are extremely costly. 

The following hazards were previously given little consideration, but are now growing in terms of loss relevance: 

  • Wildfires: When the ground and plants dry out, the likelihood of forest fires increases, along with the risk of significant damage to assets in populated areas.  
  • Subsidence: In regions where buildings are constructed on top of swelling clay, the ground may shrink during a drought, leading to subsidence. Buildings could be damaged as a result, e.g. through cracks and tilting. 

Thermal climatic conditions are among the environmental factors that have the greatest impact on an individual's health and well-being. The human body responds to changing temperature conditions in a variety of ways. In hot weather, blood pressure drops, the heart has to beat faster and the body loses considerable fluid through perspiration. These additional burdens can be too much for the cardiovascular system, particularly in the infirm, and can ultimately lead to death. 

Air temperature is not the only source of stress for the body: Humidity, wind speed and irradiation conditions can also have a significant impact. "Perceived temperature" - as it is often referred to by meteorologists - is therefore crucial. Analysis of various heatwaves shows that the perceived temperature and the number of fatalities increase almost in parallel with each other. Once the heatwave comes to an end, the number of fatalities drops below the average expected value.

Prolonged periods of heat also leave their mark on the economy — the accident rate increases and employee productivity falls.

There are also indirect effects caused by the reduced availability of water and higher water temperatures. Hydroelectric and thermal power plants are forced to reduce their output if there is not enough water to support power generation or if there is insufficient cooling water to maintain permissible discharge temperature levels. This results in economic losses for the sectors and companies concerned.

Regionally, climate change is leading to more extreme heat events

Regional deviation of 2018 annual precipitation from the 1961–1990 mean
Source: Munich Re/NOAA
Contact our experts
Mark Bove
Mark Bove
Senior Research Scientist at Munich Reinsurance America, Inc.
Eberhard Faust
Head of Research: Climate Risks and Natural Hazards
Ernst Rauch
Head of Climate & Public Sector Business Development
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