Climate Change

IPCC recommendations are a wake-up call

The findings of the Intergovernmental Panel on Climate Change (IPCC) are clear: If no action is taken, global warming will mean huge risks worldwide in the future – for populations, for companies, and for countries.


Munich Re's loss figures also 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 major drivers are increases in values and changes in vulnerability to losses, such as disproportionate increases in damage to building façades from windstorm and hail caused by the increasing use of materials that are more susceptible to damage and costlier. But in some regions and for some risks, the effect of climate change on loss events is likely already being felt. For example, losses in the USA caused by severe thunderstorms have peaked higher in the last twenty years than in previous decades, even when adjustments are made for present values. That correlates exactly with a change in the meteorological conditions under which severe thunderstorms develop. In particular, according to recent studies the annual number of storm days when many tornadoes develop at the same time has increased greatly.

We have to act now to slow climate change, because adaptation costs and losses will in all likelihood continue to increase.
Peter Höppe
Head of Geo Risks Research/Corporate Climate Centre

In our opinion, there is an even clearer indication that climatic changes are playing a role: The overall number of weather-related natural catastrophes worldwide that have resulted in losses has risen roughly threefold since 1980. By contrast, there are no significant trends for geophysical events that are not influenced by climate change. There is a strong likelihood that the effects of climate change will lead to a strong increase in financial losses and, if no preventive action is taken, to more fatalities through extreme weather. Adjustment to the ongoing changes in circumstances is therefore essential, and this may help to counteract trends towards increasing losses, or even reverse such trends on a regional basis. Climate change experts also mostly agree that emissions of climate-changing gases must be drastically reduced in the coming decades. If the 2°C target is to be met, the relative share of climate-neutral energy sources must increase four-fold worldwide by 2050.

Already unavoidable consequences of global warming

It will be a mammoth task. And today, this containment or mitigation of emissions is already not sufficient on its own. Even with reduced emissions, climate-changing gases such as carbon dioxide are still increasing in the atmosphere, as it can take over a hundred years for them to dissipate. Even after reduction of emissions, there will still be further increases in air temperatures and sea surface temperatures, and a higher water content in the atmosphere. So, we should prepare now for unavoidable consequences of global warming in the medium and long term. 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 heavy rainfall events with flooding or severe thunderstorms. Estimating future global losses due to climate change is still fraught with uncertainty.

Nevertheless, strengthening the resistance of buildings and infrastructure against natural catastrophes makes sense today, even if the effects of climate change cannot yet be quantified. Here is one example: Investments in structural flood controls in Hamburg totalling around €2bn since the catastrophic flood in 1962 have been estimated to have prevented losses of around €20bn from even stronger storm surges since then. Political decision-makers should take the findings and recommendations of the IPCC very seriously, as has been urged by the United Nations Secretary-General Ban Ki Moon. 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 is not just politicians who need to act: industry and every single individual also need to change their behaviour.

And sinking risks – regardless of whether caused by measures against climate change or by strengthening resilience against natural catastrophes – allows insurers to charge comparatively lower premiums. This shows that we are also talking about a no-regrets strategy.

This column has been published by Insurance Day.

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