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Climate Change

Knowledge networks are drivers of innovation

Munich Re has been analysing natural disaster data for decades, exchanging information on loss drivers and trends with international experts, and transferring the acquired knowledge to our insurance business. In future, this approach used by Geo Risks Research will increasingly be used in further specialist areas of high relevance at the interface between science and business. In the fields of energy, mobility, infrastructure, the Internet of Things and artificial intelligence, for example, Munich Re plans to promote networks with researchers and innovation drivers in industry. The goal is to identify trends to allow the Group to act as a pioneering business partner in the development of risk-transfer solutions and services.

14.12.2017

At a symposium held to mark the retirement of Peter Höppe, Head of Geo Risks Research, Munich Re Board member Torsten Jeworrek looked back at the research approaches taken back in the 1970s. Research efforts at that time were prompted by first indications that climate change was influencing natural disasters and, by extension, losses. This knowledge was, and remains, extremely relevant for Munich Re’s core business of providing natural hazard covers. “The approach taken by the research teams at that time, which involved working in a network with leading representatives from transnational organisations and the private sector, serves as a blueprint for tackling future technologies,” said Jeworrek.

Research on what impact climate change is having in particular regions

Peter Höppe, who is a meteorologist himself, spent 14 years developing the Geo Risks Research knowledge network at Munich Re. This enhanced expertise on natural disasters has helped to pave the way for new digital analysis and solution tools, and improved the insurability of natural hazards. After he retires from Munich Re at the end of the year, his colleagues in Research will face a more demanding task. In order to make greater use of Munich Re’s unmatched expertise on the subjects of natural disasters and climate in its cooperation with clients, the units will be more closely linked to operational areas in future. “In the past, it was more important to know whether climate change was happening or not”, explained Jeworrek. “Nowadays, our research interests focus more on the following questions: exactly what impact is climate change having in particular regions, and will it be possible in future to make shorter-term forecasts of specific developments in connection with natural disasters.”

Nat cat research is valuable for the business of Munich Re – Board member Torsten Jeworrek

Using a number of examples, Ernst Rauch, Head of Climate & Public Sector Business Development, explained what this research approach could look like in the field of climate change. For example, measures aimed at protecting the climate affect resources and the availability of particular metals, such that greater amounts of precious metals will be needed if electric vehicles are promoted around the world. According to a study by the World Bank, the demand for precious metals would be many times higher in a scenario with a 2°C increase in global temperature than it would be with the 4°C increase that the world has been heading for up to now. This could affect technological developments and the need for new, technology-specific insurance solutions. It is a similar story with energy generation and storage technologies such as “power to gas” technology – the use of electricity from renewable energy sources to create synthetic methane or hydrogen as a carbon neutral fuel. “We need to understand technologies and market trends at an early stage so that we can use our expertise to fulfil our role as a risk carrier, partner, and consultant for our clients," said Rauch.

Schellnhuber: We have tough nuts to crack in the area of climate change

At the symposium, two respected researchers highlighted the importance of insurance companies for risk assessment, and thus for shaping the future: Professor Hans Joachim Schellnhuber, from the Potsdam Institute for Climate Impact Research (PIK), argued that unchecked climate change posed the threat of impacting on climate-related global systems such as the Gulf Stream, and thus of generating entirely new dimensions of risk. "We have some very tough nuts to crack in the area of climate change," he said. “And it is good to know that leading companies like Munich Re are helping here, and that there are specialists who know how to leverage the nutcrackers.”

Unchecked climate change poses threat of impacting climate-related global systems, says PIK Potsdam Director Schellnhuber

Munich-based researcher, astrophysicist and natural philosopher, Professor Harald Lesch, touched on the topics of artificial intelligence (AI) and the understanding of risk. We already have highly developed systems based on AI technology that are extremely efficient at collecting and analysing data. Professor Lesch pointed out that one of the central challenges of AI systems lay in the potential autonomy of machine learning algorithms. “There must always be people who control and understand artificial intelligence,” he warned. “Otherwise, artificial intelligence will simply develop as an end in itself.” This also applied for automated risk assessment at banks and insurance companies: “We always need to understand why AI arrives at one particular assessment and decision, rather than another. So what we need is a healthy mix of human and artificial intelligence.”
 
Bavarian Minister for the Environment and Public Health, Ulrike Scharf, paid tribute to Munich Re’s role in the policy consultation process. Peter Höppe was a member of the Bavarian Climate Council for eight years following its founding in 2007, and made it an indispensable support for the regional government, she said.

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