Global climate change will continue taxing the insurance andreinsurance industry landscape through the end of thecentury—especially from losses caused by sea level rise, inlandflooding and drought.

“In order to adapt to climate change and the changing risklandscape, it is necessary to cut through [the] noise andfocus on objective decisions to mitigate both the financial andsocial risks associated with climate change,” says Johnny Chan,director of the Guy Carpenter Asia-Pacific Climate ImpactCentre.

According to a recent Guy Carpenter climate change report, whichis based on data from the Intergovernmental Panel on Climate Change(IPCC), economic losses from climate catastrophes increased from$75.5 billion in the 1960s to $660 billion in the 1990s, with a“significant increase in the values of exposure” as populationsgrow and coastlines urbanize.

Additionally, global climate models project an estimatedtwo-to-four degree Celsius increase in mean Earth temperature byend of the century.

“This may seem like a relatively small increase, but the impactof rising temperatures, even by a few degrees, could cause a shiftin weather patterns, with considerable impacts worldwide,” saidJames Waller, research meteorologist for GC Analytics.

Coastal flooding from sea level rise is the most seriousclimate-related threat, says Guy Carpenter, with a one-to-two footexpected rise by the end of this century compounding the severityof cyclones, tsunamis and hurricanes.

This is especially worrying in a future in which the InsuranceInformation Institute (I.I.I.) predicts events like SuperstormSandy, which hit the insurance industry with $18.7 billion indamages, will occur more commonly. Furthermore, the world willexperience at least 10 feet of sea level rise by midcentury even ifaggressive carbon-emissions cuts are implemented immediately,according to Climate Central research.

In order to mitigate losses, Guy Carpenter suggests improvingbuilding codes for coastal flood resilience in vulnerable areas,introducing coastal defense structures such as dykes and seawalls,and shifting new developments away from coastlines.

Inland flooding from increased precipitation, Guy Carpenter'ssecond-named climate change threat, will tax aging storm watermanagement systems that are poorly equipped to handle major waterinflux and open the floodgates to urban flooding. Adaption to thisthreat must include attention to storm water managementinfrastructure for accommodating larger volumes of rainwater,upgrades to civil infrastructure codes and standards, andimplementing rainwater catchment basins.

In contrast, drought follows third on the report's list of topclimate related threats. By the end of the century, global climatemodels indicate the number of days between rainstorms will increasefor areas including Southern Australia, Southeast Asia and India,Southern Europe, Central America and Western North America as areasof the Colorado Basin in the U.S. and in the Himalayan watershedsalready face water shortages. Meanwhile, urban areas put themselvesat risk as expanding skylines reduce groundwater rechargezones.

Drought will lead to decreased soil moisture in the U.S. andEurope, creating deserts in areas now used for agriculture andspurring blazes: over the past 30 years, the wildfire season in thewestern U.S. has increased by nearly 80 days.

The insurance industry will have to promote new building codes,sustainable land use strategies and rainwater-catching technologyto keep up with the droughts, floods and fires of the future.

“Some important avenues include advocating for construction tocode, and better yet to standards advocated by FEMA and theInstitute for Business and Home Safety (IBHS), especially incoastal areas subject to the projected sea level rise threat,” saysWaller, including long-term review and upgrading of local floodcontrol infrastructure in coastal and inland areas, land usemeasures that dissuade development in coastal areas, andcatastrophe models that explicitly account for a variable amount ofsea level increase over a number of years.