Climate change, reinsurance and Lloyd's made worldwide headlines in 2006
Climate change or global warming is the 800-pound gorilla in the insurance industry. More reports this year added to the growing body of evidence that the planet is heating up, and potential disasters on a global scale are becoming more likely.
Last February's Davos Conference set the tone. The Lloyd's delegation, headed by Chairman Lord Levene, told business leaders that it aimed to make them aware "that the past five years cannot be seen as a simple spike, but an indication of a growing trend of the rising economic costs of natural and man-made catastrophes."
Over the course of the year the scientific community released new studies that backed up Levene's fears. Some of the more important ones were as follows:
- The U.S. Climate Change Science Program declared that scientists and other researchers now agree that global climate change is a reality backed up by "well-documented findings" of higher temperatures in the world's oceans and atmosphere; although to what extent human activities are responsible remains debatable.
- The National Center for Atmospheric Research and the University of Arizona found strong evidence that warmer Arctic temperatures could eventually raise sea levels up to 20 feet (6 meters) higher than today. A report this month from the National Center for Atmospheric Research (NCAR) foresees an ice free Arctic during the summer by 2040.
- The Australian government's Department of the Environment and Heritage concluded that the earth is warming up faster than forecasted in a 2001 IPCC study.
- Lloyd's issued its first 360 Report "Global Warming - Climate Change, Adapt or Bust," telling the industry that it must "face up to the growing threat of climate change or risk being swept away."
- The Stern report, "Economics of Climate Change," warned that "unabated climate change risks raising average temperatures by over 5°C [9°F] from pre-industrial levels, and could result in lowering worldwide GDP on average of 5 percent a year.
- In November, at a United Nations Environment Program (UNEP) conference in Nairobi, a new report, "Adaptation and Vulnerability to Climate Change: The Role of the Finance Sector," based on analyses from Munich Re and Allianz, noted, among other findings, that "much of the world would probably experience major catastrophic weather events and accompanying mega-losses."
Dr. Thomas Loster, a geographer who advises the Munich Re Foundation, told the Conference: "Most insurance and reinsurance companies have no doubt that the rising tide of losses from weather-related disasters is linked with climate change. The possibility of a one trillion dollar loss year is one scenario out of many, but whatever the precise figures the losses are already large and set to increase."