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The phrase “Climate Change” has taken its place in the world’s lexicon alongside “discrimination,” “colonialism,” “nationalism,” “iron curtain,” “liberalism,” and other buzz words that invariably cause a reaction.
The current Climate Change Convention, which winds up today, Dec. 17, in Buenos Aires, Argentina, is a case in point. While most of the world’s leaders now recognize that the global climate is changing, even those in the U.S., there’s wide divergence as to what the causes are, and what, if anything, can be done to halt it.
For the world’s P/C insurers and reinsurers, however, the subject is much more than academic, as they will bear a goodly proportion of the losses caused by extreme weather. According to preliminary figures compiled by Munich Re insured losses for the first 10 months of 2004 were $35 billion, $26 billion in the U.S. alone. 2004 will be the most costly year ever for the industry.
According to a BBC report, Munich Re’s climate expert, Thomas Loster, who presented the figures at the conference, stated: “As in 2002 and 2003, the overall balance of natural catastrophes is again clearly dominated by weather-related disasters, many of them exceptional and extreme.” So far, there’s no argument, but then Loster stated: “We need to stop this dangerous experiment humankind is conducting on the Earth’s atmosphere.”
The idea that mankind in general, and the industrialized world in particular, is responsible for climate change, and that major alterations in energy production and use are needed to reverse the situation, is a subject of highly partisan debate. While many leading climatologists point fingers at the West, and particularly the U.S., to do something about climate change, such as signing the Kyoto protocol limiting greenhouse gas emissions, other experts point out that the world’s climate has never been stable, and that forces beyond human control are mostly responsible.
The United Nations, which isn’t exactly the Bush Administration’s favorite international forum, has chosen the side of environmental activism. The meeting in Buenos Aires, attended by ministers from 180 countries, marks the 10th anniversary of the entry into force of the United Nations Framework Convention on Climate Change (UNFCCC), which served as a central theme for the meeting.
Klaus Toepfer, Executive Director, United Nations Environment Program, read remarks from UN Secretary General Kofi Annan, indicating that “with its nearly universal membership, the United Nations Framework Convention on Climate Change has helped to place climate change firmly on local, national and international agendas.” He also noted that it has “established the institutions and processes with which to address this quintessentially global challenge. As we mark the tenth anniversary of the Convention’s entry into force, we can say with a sense of achievement that our ‘child’, so to speak, is growing up. But much more needs to be done as it comes of age, so that we can feel confident that the problem is being adequately addressed.”
If the world is going to succeed in doing anything to ameliorate the problem, assuming that it can have some influence on it, it needs the participation of the world’s biggest user of energy (and biggest polluter), the U.S.
“Worrying signals continue to reach us about the impacts and risks of climate change,” Toepfer continued with Annan’s remarks. “The Intergovernmental Panel on Climate Change (IPCC) [a UN sponsored agency] has already showed us that the frequency and intensity of extreme weather events may increase. Its forthcoming assessment report will no doubt deepen the already compelling scientific case for urgent international action on both mitigation and adaptation.”
The insurance industry is justifiably worried that the increasing frequency and severity of weather related events will ultimately prove more costly than it can bear. Loster pointed out that the overall costs of destruction from them in 2004 would exceed $95 billion, compared to an average of $70 billion over the last 10 years. If that figure continues to increase, as many experts predict it will, the industry’s share of the losses will also rise, perhaps to a point where they are no longer sustainable.