Munich Re: Ambitious climate targets needed

This is interesting coming from the insurance industry who will see payouts if bad things happen. The fact that payouts will increase does not necessarily mean that insurance industry cares. It could easily mean brisk business. We need to dig a little deeper to understand their economics and response. But at the surface, it makes the right noises.

Ambitious climate protection targets are needed –
or the cost of climate change will keep rising

Munich Re’s NatCatSERVICE database shows that, globally, the average number of major weather-related catastrophes such as windstorms, floods or droughts is now three times as high as at the beginning of the 1980s. Losses have risen even more, with average increases of 11% per year since 1980. To what extent the increased losses are due to climate change is not yet clear. Preliminary analyses suggest that it accounts for a low single-digit percentage of
annual overall losses.

Although this increase appears low, the amounts involved are enormous. This is illustrated by total natural catastrophes losses in the period 1980–2008. According to studies by Munich Re, overall losses due to weather-related events came to around US$ 1.6tn in original values, with insured losses amounting to approximately US$ 465bn. In the period from 2000–2008 alone, overall losses totalled over US$ 750bn, whilst insured losses came to around US$ 280bn.

“Even conservative estimates show that we are talking here about climate change costs already running into billions per year. The insurance industry is able to adapt but, in the end, each individual has to bear the cost”, said Peter Höppe, Head of Munich Re’s Geo Risks Research. “It is therefore very important and makes economic sense to lay cornerstones for a new agreement, with ambitious targets, in Copenhagen. After all, the climate reacts slowly. Even now, climate change can no longer be halted, it can only be attenuated. And it is time this was done.”

According to Höppe, in Copenhagen a binding commitment will have to be defined that limits global warming to 2°C above pre-industrial levels. This can be done only if global carbon emissions are cut to 50% of 1990 levels by 2050. Höppe: “That means the industrial countries will have to achieve 80%, and that globally there will have to be a real fall in emissions within the next few years.” Furthermore, to rapidly find a successor to the Kyoto Protocol, all the principal carbon emitters would have to accept binding reduction targets.