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Insurance Industry Report on Risks of Climate Change

An insurance industry group has come out with a report on the significant and unpredictable risks caused by climate change. The Geneva Association Report warns that models previously used by the insurance industry to predict climate related events are no longer reliable. The report focuses on the uncertainty resulting from sea level rise and ocean warming.

“Another implication of ocean warming is the potential for longer tropical cyclone seasons….A longer hurricane season, starting earlier and ending later, can change some of the storm characteristics and increase the damage potential of cyclone season. There are indications that this is the case for example in the Hurricane Sandy on the U.S. East Coast at the end of October 2012….The impact of ocean warming on other loss-relevant hurricane characteristics, such as size, genesis potential and location of landfall, is deeply uncertain and, because of the sparse data, it will take some time until a potential signal may appear in observational time series.”

In addition to calling for internal actions by the industry in risk assessment, the report calls for “external” actions.

” The insurance industry should play an active role in raising awareness of risk and climate change through risk education and disseminating high-quality risk information…In addition, there is real benefit for the industry in supporting and encouraging adaptation through innovative product design. This can and should be done in collaboration with local authorities through engagement in public–private cooperation. This will, as well as enhancing reputation, lead to a more resilient building stock and an overall reduction of risk.”

Interestingly, the report also calls for the industry to both invest in and lobby for new energy technologies.

“Investment in innovation and global capacity-building for new energy technologies and infrastructure does not only promise good returns but also contributes to the reduction of greenhouse gas emissions which will ultimately create a more resilient society. To support this transition, the industry should use its unique knowledge base to inform the debate on climate change and actively lobby government to take action to reduce risks and curb emissions of greenhouse gases.”

-Steven M. Silverberg