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CLIMATE CHANGE AND TRENDS OF NATURAL DISASTERS – WHAT IS TO BE DONE Peter Hoeppe Geo Risks Research/Corporate Climate Centre 2 nd Conference of the OECD.

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Presentation on theme: "CLIMATE CHANGE AND TRENDS OF NATURAL DISASTERS – WHAT IS TO BE DONE Peter Hoeppe Geo Risks Research/Corporate Climate Centre 2 nd Conference of the OECD."— Presentation transcript:

1 CLIMATE CHANGE AND TRENDS OF NATURAL DISASTERS – WHAT IS TO BE DONE Peter Hoeppe Geo Risks Research/Corporate Climate Centre 2 nd Conference of the OECD International Network on the Financial Management of Large Scale Catastrophes

2 Munich Re Insurer for Insurances Founded 1880 One of the leading reinsurance companies Covering risks of natural hazards is part of the core business 2

3 MR-Publication Flood / Inundation (August 1973) © January 2007, Münchener Rückversicherungs-Gesellschaft, Geo Risks Research Munich Re the First Alerter to Global Warming 3

4 Origins and Types of Natural Catastrophes Extraterrestrial: Meteorites Geophysical (terrestrial): Earthquakes, volcano eruptions, tsunamis Atmospheric (weather): Windstorms, floods, storms, hail, lightning, avalanches, mud slides No human influence Pieces of evidence for human influence, risk of change!

5 Trends of Natural Disasters Intensities The last years have brought records in natural disasters in respect to: Frequencies Damages and losses 5

6 Heat stress Cold stress light extreme high moderate light comfortable moderate high extreme Perceived Temperature on 8 August 2003 and excess mortality Sources: Robine et al., 2007; German Weather Service, Heat wave of 2003, with more than 70,000 fatalities the largest humanitarian natural catastrophe in Europe for centuries

7 Hurricane Katrina, USA (1.322 fatalities) Insured losses (US$ m): Economic losses (US$ m): (NFIP included) source: AP August 2005 – Hurricane Katrina 6th strongest hurricane, largest losses of a single event 7

8 July 2005 – Mumbai Flood On 26th July 2005 the meteorological station at Santacruz in North Mumbai (India) recorded 944 mm of rainfall within 24 hours, the highest ever in the history of precipitation recordings in India. Insured losses (US$ m): Economic losses (US$ m): Fatalities: 1150

9 Flood series in the UK, June- July 2007 Largest flood loss ever! Source: Overall losses: > US$ 8 bn Insured losses: US$ 6 bn Overall losses: > US$ 8 bn Insured losses: US$ 6 bn 9

10 Tropical Cyclone Nargis, May 3, 2008 Source: Wind velocities up to 215 km/h (Cat 4) Floods in the Irrawaddy delta, also Yangoon affected Human catastrophe Estimated number of fatalities about 100,000 © 2008 Münchener Rückversicherungs-Gesellschaft, GeoRisikoForschung, NatCatSERVICE

11 Victoria Wildfires, Australia (Black Saturday Fires) February 2009 Source: Reuters, Berlin © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June 2009 Wildfires, February 2009 Overall losses: US$ 1,300m* Insured losses: US$ 650m* Fatalities: 173 Wildfires, February 2009 Overall losses: US$ 1,300m* Insured losses: US$ 650m* Fatalities: 173 *Losses in original values 11

12 Munich Re NatCatSERVICE – One of the worlds most comprehensive databases on natural catastrophes From 1980 until today all loss events For USA and selected countries in Europe all loss events since 1970 Retrospectively all Great Natural Catastrophes since 1950 In addition all major historical events starting from 79 AD – eruption of Mt.Vesuvio (3,000 historical data sets) Currently more than 26,000 events documented Great natural catastrophes: Hurricane Ike Cyclone Nargis Earthquake China Winter damage China Extreme temperature (heat wave, forest fires) Flood Storm Earthquake, tsunami, volcanic eruption Natural catastrophes 2008 © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June

13 Great natural catastrophes in Asia 1950 – 2008 Geophysical events (earthquake, tsunami, volcanic activity) Meteorological events (storm) Hydrological events (flood, mass movement) Climatological events (extreme temperature, drought, wildfire) © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As at September 2009 Natural catastrophes in Asia

14 Climatological events (Extreme temperature, drought, forest fire) Hydrological events (Flood, mass movement) Meteorological events (Storm) Weather catastrophes in Asia 1980 – 2008 Number of events Natural catastrophes 2008 © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As at September 2009

15 Global natural disasters 1980 – 2008 Geophysical, meteorological, hydrological events Hydrological events (Flood, mass movement) Meteorological events (Storm) Geophysical events (Earthquake, tsunami, volcanic eruption) Trend line Number © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE 15

16 Climate change probably has a significant impact on increases of nat cat losses, especially in North America and Asia/Australia. GlobalNorth America EuropeAsia/ Australia 1980 – 2007 Nat cat loss trend (% p.a.) Climate component (% p.a.) 4516 Comments These data are indicative only – a more precise determination of the regional loss drivers related to climate change is needed (e.g. via LSE cooperation) Nat cat loss trend: growth rates of original/nominal values and not adjusted for inflation Climate component: actually Climate plus X because influencing factors include anthropogenic climate change, natural climate variability, changes in vulnerability and changes in population distribution Annual growth rates of nat cat losses and climate component 16

17 Black lines: decadal averages of observations Blue band: 5-95% range 19 simulations from 5 climate models using only natural forcings Red band: 5-95% range for 58 simulations from 14 climate models using natural and anthropogenic forcings Quelle: IPCC FoAR, 2007 Global Warming is Real! Continental Temperature Changes 17

18 very likely > 90% likely >66% more likely than not > 50% Climate Change and Extreme Weather Events (IPCC, 2007) 18

19 Trends of heavy precipitation events during summer monsoon in India Source: Goswami, B. N. et al. (2006), Science 314

20 Increase of Sea Level for different CO 2 -Scenarios *Basis: Range of ΔT = 1.5º-5.8ºC (IPCC TAR) Quelle: Rahmstorf (2007), Science, 315, 368 A1FI B1 140 cm 50 cm

21 Observed changes in sea surface temperatures NATL = North Atlantic WPAC = West Pacific SPAC = South Pacific EPAC = East Pacific NIO = Northern Indic SIO = Southern Indic Source: Webster et al. (2005), Science,

22 Residence Time of Greenhouse Gases in the Atmosphere Greenhouse gas Value 1750 [ppm] Value 2007 [ppm] Human share [%] Residence time [years] Relative green- house potential Share human GHE [%] CO 2 (Carbon dioxide) CH 4 (Methane) N 2 O (Nitrous oxide) CFCs (Chlorofluoro- carbons) SF 6 (Sulphur- hexafluoride) <1 H 2 O Water vapor 1-3 few days2 Source: IPCC, diverse

23 Munich Re as a risk carrier Wind energy (offshore, onshore) New opportunities: Wind and no-wind covers Annual income depends on wind conditions. Cover (examples): Cover for the technology in the construction phase ALoP: Advanced loss of profits insurance provides indemnity in the event that loss or damage leads to construction delays Credit risks can be covered e.g. if it is not possible to deliver (on the agreed date) Cover can be provided for loss of income due to an excess/lack of wind (investors and operators) © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June

24 Munich Re as a risk carrier © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June

25 DESERTEC Concept for Energy, Water and Climate Protection © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June

26 DII Founding Meeting at Munich Re 13 July 2009

27 Desertec Industrial Initiative (DII) 12 companies signed a Memorandum of Understanding to establish a Desertec Industrial Initiative (DII). The objective of this initiative is to analyse and develop the technical, economic, political, social and ecological framework for carbon-free power generation in the deserts of North Africa.

28 Insurance Linked Adaptation to Increasing Weather Extremes in Developing Countries Munich Climate Insurance Initiative (MCII) MCII was founded in 2005 on initiative by Munich Re Today MCII is a registered non profit organisation with members from: Insurance, NGOs, Relief Organisations, Research Institutes, World Bank and independent experts. Objectives: Develop insurance-related solutions to help manage the impacts of climate change in developing countries. Recent activities: MCII-Submission to UNFCCC with concrete suggestions of insurance tools to be implemented in a Post-Kyoto-Protocol. Suggestions are being discussed by delegates of the climate negotiations on their way to Copenhagen. MCII

29 The MCII Proposal Prevention Pillar High Layer RISK Middle Layer RISK Low Layer RISK TIER 1 Climate Insurance Pool TIER 2 Support for micro and macro insurance systems Insurance Pillar RISK MANAGEMENT MODULE The two-tiered insurance pillar Meets the principles set out by the UNFCCC Provides assistance to the most vulnerable, and Includes private market participation. Premiums paid by AF ($5 bn) Support financed by AF ($2 bn) Support financed by AF ($3 bn) Rough estimated annual costs: $ 10 bn RISK MANAGEMENT MODULE Prevention Pillar Insurance Pillar Low Layer RISK mainly TIER 1 Climate Insurance Pool TIER 2 Support for micro and macro insurance systems High Layer RISK Middle Layer RISK

30 Evaluating the economics of climate risks & opportunities in the insurance sector Main areas of research activities quantifying the costs of a climate-related increase in natural catastrophes dealing with the uncertainties of climate models evaluating the potential and consequences of emissions trading systems and the appropriate design of such schemes estimating the economic impacts of climate change on the BRIC states (Brazil, Russia, India, China) Institute: Centre for Climate Change Economics and Policy at LSE Chair: Lord Nicholas Stern Management: Prof. Rees (LSE), Prof. Gouldson (Leeds) Project duration: Sponsoring:£3m (~ 4m) Collaboration between Munich Re and the London School of Economics 30

31 Conclusions Natural catastrophes, especially weather related events, are increasing in number and magnitude especially in Asia. There is more and more scientific evidence for causal links between climate change and increasing frequencies and intensities of natural catastrophes. Global warming is real. We have to mitigate global warming and adapt to the changing risks in respect to the regionally specific risk patterns. In Copenhagen ambitious CO 2 -reduction targets should be fixed to avoid dangerous, unmanageable climate change. The insurance industry supports climate change mitigation and adaptation measures by sharing its knowledge with the public and providing custom made covers for innovative technologies. 31 The Copenhagen outcome should provide adaptation funds for developing and emerging countries, including new insurance solutions.

32 THANK YOU!


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