It is true that heads of state and government did not manage to cut the knot at the start of the Paris climate conference and agree to binding emissions reductions, but the declarations of world leaders demonstrate that the problem has been recognised. Indeed, politicians are now more aware of the acuteness of the problem than ever before, and commitments to reduce emissions have never been so significant.
That said, it is unlikely that an agreement will be reached that will limit global warming to two degrees. This was the target agreed upon at the Cancún climate change conference in 2010, as scientists believe that the worst consequences of climate change would be manageable if the temperature rose by two degrees or less. But progress is far too slow, and levels of greenhouse gas emissions are actually still rising. The biggest polluters in particular – China, the USA, the EU, India and Russia, which are together responsible for approximately 70% of current emissions – must assume responsibility for their share. According to the IPCC, each further year in which emissions remain the same or even grow requires an increasingly steeper decarbonisation commitment – and carries correspondingly higher abatement costs.
It is an economic imperative to act now to slow climate change, because adaptation costs and losses will in all likelihood continue to increase. It also makes much more financial sense for states to decarbonise their economies than to fork out increasingly large sums for safety measures and damage caused by natural hazards, not to mention the human suffering involved. We have to be prepared for the increasingly inevitable and significant consequences of climate change.
The risks from climate change are obvious
Greenhouse gases such as CO2 can stay in the atmosphere for over 100 years, continuing to cause further temperature increases long after emissions have been cut. Sea levels will continue to rise, and in the long term we should expect to suffer more and stronger extreme weather events (differing according to region and type of risk), such as torrential rain leading to flooding. The more our planet warms up, the more frequent and intense will be the weather-related natural catastrophes we experience. That is why every single measure that reduces global warming is better than none at all.
Munich Re's loss figures reflect the increasing risks. Economic and insured losses from weather-related natural catastrophes across the world are increasing significantly in the long term, even when adjusted for inflation. The factors with the greatest impact on claims are still increases in exposed values and changes in vulnerability to losses, such as disproportionate increases in damage to building façades from storms and hail caused by the use of materials that are costlier and more susceptible to damage.
Prevention becomes even more important – project InsuResilience of G7
Alongside the reduction of emissions (mitigation), adaptation to the the consequences of an even warmer climate must also be placed higher up on the political agenda. This is essential and can help to counteract upward trends in losses. Preventative measures can reduce vulnerability, and preparing for loss or damage can increase resilience. It may sound technical, but in practice these measures save lives and protect assets. Such steps could take the form of technical flood protection, the development of new farming systems, or even the creation of insurance solutions.
For emerging and developing countries in particular, climate insurance is an efficient way to cushion the economic impact from natural catastrophes, and secure better opportunities for sustainable economic growth. The G7 has committed, and it is currently being implemented in a five-year project called "InsuResilience". An example from Hamburg demonstrates the extent to which it already makes sense to increase the resilience of buildings and infrastructure to natural catastrophes. Investments in structural flood controls totalling around €2bn made since the catastrophic flood in 1962 have been estimated to have prevented losses of around €20bn from even stronger storm surges since then. Part of the process of adapting to the now unavoidable consequences of climate change will be securing the required financing. One aim is to mobilise US$ 100bn annually for the Green Climate Fund from 2020 onwards in order to protect developing countries in particular from the consequences of climate change. The UN has also underlined the importance of technology transfer, with renewable energy playing an important role here.
Binding reduction measures should be decided on in Paris even if it proves impossible to agree on steps that will allow the 2-degree limit to be met. In further specific stages, reduction targets should be increased and binding financing for adaptation measures guaranteed, particularly for emerging and developing countries. The link between increasing weather-related disasters and refugee movements is certainly not a trivial one, but rather offers a further good reason for the global community to take responsibility for the countries most affected by climate change – yet least responsible for causing it.
Munich Re has been addressing climate change since the 1970s, and first expressed concern about the subject in 1973 in a publication on flood risks. In 1974, the Geo Risks Research department was set up to investigate potential changes in the risks from natural hazards. Munich Re has been advocating reductions in emissions for approximately 25 years, and has been initiating and supporting various insurance solutions for many years in order to help developing countries adapt to the consequences of climate change. In cooperation with development banks, NGOs (such as the Munich Climate Insurance Initiative, MCII), and the public sector, Munich Re is already providing expertise and reinsurance capacity to support the development and introduction of climate insurance solutions.