Climate change is real and we must start dealing with it now is an increasing chorus that threatens to become a cacophony as major governments and business organisations trumpet it.
Latest to join in is the major global insurer Lloyd’s which has announced that in its opinion “climate change is real and we need to factor it into all future catastrophe modelling.”
Lloyd’s the world’s specialist insurance market and fifth largest in terms of global reinsurance premium income, makes the assertions in a new study, The report: ‘Catastrophe Modelling and Climate Change’.
The report states that with the existence of climate change, and the effect it is having globally, the time has come for the insurance industry and catastrophe modelling firms to recognise factors such as surface sea level and air temperature rises throughout their models.
While climate change trends may be implicitly built into existing catastrophe models, given the heavy use of historical data in constructing them, these trends are not necessarily explicitly incorporated into the modelling output.
Lloyd’s report finds that changes in climate have the potential to affect extreme weather events, which subsequently impact on insurance being underwritten in the Lloyd’s market.
It points to events such as the 20 centimetre sea level rise caused by Superstorm Sandy in 2012 that increased losses by 30 per cent in New York alone.
Lloyd’s report says storm surges of over five metres were also a major factor in the devastation caused by Typhoon Haiyan in the Philippines last year.
The report finds that the frequency of extreme weather events in most regions of the world, including Europe, North America, Asia and Australasia, has increased.
John Nelson, Chairman of Lloyd’s, said: “Climate change is a reality and the vast majority of scientific research concludes that it is being driven by human activity.
“Whilst some debate still remains as to the extent of climate change, the evidence points to it leading to more extreme weather events.
“Catastrophe models are what the insurance and other industries use to quantify our understanding of the natural world and predict the impact of the weather.
“We need to be able to model and understand these events better, and help mitigate the impact climate change is having on communities and businesses.”
Kent Chaplin, Lloyd’s Head of Asia Pacific, said: “The insurance industry sits at the forefront in helping to mitigate the impact of extreme weather.
“Research is telling us that climate change will bring heatwaves, droughts, higher sea levels, larger storm surges, and possibly stronger cyclones and more flooding.
“Communities across Asia Pacific are highly exposed to these risks and catastrophe modelling firms and insurers need to account for surface sea level and air temperature rises in their modelling so we can better understand and prepare for their impact.
“Insurers can also help to strengthen defences against climate change by sharing our knowledge and expertise with the public sector to encourage climate change mitigation and adaptation strategies across the most vulnerable regions of Asia Pacific,” Mr Chaplin added.
The report can be found here
