A tale of 2 (of many) Insurance Companies and Climate Change: AXA / FM Global

Insurance companies getting in on the Climate Change Action FM GLOBAL U.S. businesses, depending on their location, should start preparing now for the increased, extreme rainfall that a changing climate will almost certainly deliver. That’s the advice FM Global, one of the world’s largest commercial property insurers, offered in its new white paper published today. “Businesses must recognize that climate change is happening and it will generally get warmer,” cautions Dr. Kevin Trenberth, distinguished senior scientist at the National Center for Atmospheric Research, in the white paper, titled Coping with Extremes:  The Impact of Climate Change on Extreme Precipitation and Flooding in the United States and How Businesses Can Prepare Now. Trenberth is one of four leading atmospheric scientists consulted for the paper. In general, wet areas of the country will likely become wetter and dry areas drier. Of particular concern, the paper states, are changes that are severe in the extremes: “Extreme events have the greatest potential to produce natural catastrophes that affect businesses, jobs and economies on a regional or global scale.  The paper introduced several new climate-related concepts, including: Geographic variability: “Certain regions of the United States are expected to be prone to more intense precipitation events and a potentially increased risk of flooding,” the white paper states. “Others are prone to less precipitation, prolonged droughts and a potentially increased risk of wildfires. Since these anticipated changes are not uniformly distributed geographically, it is recommended that businesses and property owners prepare for locally intense precipitation or drought considerations, depending on their location.” Bigger rainfall, but maybe not more overall: Although much of the country has gotten wetter in recent decades, long-term precipitation averages will not necessarily change significantly. Rather, rain may be less frequent but more intense. Coping with Extreme Precipitation and Flooding-FM Global Whitepaper

AXA By 2030, 60% of the world’s population will be living in cities, which will be at the core of the climate conundrum. Now that climate change has become a reality, how will our cities and SMEs adapt to its impact? How will they manage the new economic, social and environmental risks? What are the challenges and obstacles that are slowing down resilience efforts? These are the primary questions raised this summer with some 1,100 SME directors and urban leaders from major cities in 18 countries across Europe, the Americas and Asia. axa PAPERS Risk education and research No.4 CLIMATE RISKS Climate Risks Tsunami in Japan, tornadoes in the USA, earthquakes in New-Zealand, or major flooding in many parts of the world: 2011 was an extremely adverse year in term of natural catastrophes. The resulting fatalities have been numerous. As far as economic losses are concerned, 2011 was a record-breaker.  But, is there an upward trend in natural extreme events? Can we identify what the source of this increase in losses is? Is there simply a densification of exposure in risky areas? Or is our climate system changing and making extreme weather events more frequent, more intense, if not both?  While some aspects of the consequences of climate change are still actively debated within the science community, some facts and trends have been recently confirmed. In particular, a recent report: IPCC, 2011: Summary for Policymakers. In: Intergovernmental Panel on Climate Change Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation specifies that some extreme climate patterns (e.g. temperature extremes, rainfall and flooding events) have changed since 1950. This paper aims to discuss the risks associated with the climate and their potential evolution from an insurance perspective. It covers, first, the latest scientific evidence on observed climate evolution, as well as available projections.  Climate change and the associated modification of natural catastrophe patterns are a key challenge for the sustainability of the insurance industry. Insurers have to monitor, therefore, even more than they did in the past, climate risks. As natural disasters are extreme in intensity, space and time, this monitoring requires specific modelling and simulation techniques. Initially developed by the climate community, these techniques are increasingly used within the insurance industry. The paper looks into some of them. Finally, are also discussed the levers the insurance industry, building on its strong expertise, may use in order to play its economic and societal role and, ultimately, help tackle climate change.