Climate Change Seen Posing Big Risk For Insurers
SYDNEY The global insurance industry faces substantial risks from climate change due to the increased incidence of cyclones, floods, drought and bushfires, a major European reinsurer told the Greenhouse 2007 conference.
Losses from tropical cyclones were increasing particularly strongly, Eberhard Faust, head of climate risks at Munich Re (MUVGn.DE: Quote, Profile, Research), he told the conference organized by the Australian government-backed Commonwealth Scientific and Industrial Research Organization.
Increasingly built-up coastal areas were highly susceptible to catastrophes associated with climate change, with potential annual losses now $200 billion against $25 billion in 1950. Hurricane Katrina caused about $66 billion in losses in 2005 when it devastated the southern United States city of New Orleans, just a year after Hurricane Ivan caused $13.7 billion in property damage in the Caribbean.
Global flood catastrophes were also growing, with flooding in Europe in 2002 causing $3.4 billion in insurance losses.
Australia was increasingly vulnerable to drought and storms, Faust said.
Cyclone Larry, which slammed into Australia's far north Queensland state in 2006 hitting the region's banana and sugar industries, caused losses of $1.75 billion. The drought of 2002, Australia's worst in 100 years, caused losses of $2.5 billion.
Drought and bushfires accounted for 39 percent of the country's overall insurance losses of $24 billion between 1980 and 2006.
Australian insurers have also recently warned of greatly increased risk from rising sea levels caused by global warming.
The United Nations Intergovernmental Panel on Climate Change has projected sea level gains of up to 59 centimeters (23 inches) this century as rising temperatures melt polar ice. Scientists say the rise could be much greater: possibly well over 1 meter.
Scores of properties along fashionable parts of the vast Australian coastline were likely to become uninsurable, Barrie Pittock, the former head of the CSIRO's climate impact group, said earlier this year.
The incidence of extreme weather conditions in Australia was likely to increase sharply in the year ahead, Faust told the conference, with 20 percent more months of drought forecast by 2030 and up to a 25 percent increase in the frequency of bushfires.
Risk of floods would also increase, along with a 20 percent rise in the frequency of major east coast cyclones by 2050, he said.
The current drought was expected to cut Australia's gross domestic product growth by possibly more than 0.75 percent, the country's chief scientist Jim Peacock told the conference.
"Living on many parts of the globe will be difficult for humans," he said.
On a more positive note, Faust also said business opportunities abounded in countering climate change, including the development of renewable energy, increased water-use efficiency, water recycling and desalination.