Extreme weather from global warming is causing an increase in financial losses from events that are stressing the insurance marketplace, one catastrophe modeling firm contends.
Newark, Calif.-based Risk Management Solutions issued that warning with Friday's release of an Intergovernmental Panel on Climate Change report, which was written in part by an RMS scientist.
The IPPC group was established in 1988 by the World Meteorological Organization and the United Nations Environment Program. The "Summary for Policymakers" report it issued Friday warned about possible effects of global warming ranging from increased flooding, hunger, drought and diseases to the extinction of species.
RMS said Chief Research Officer Robert Muir-Wood was a lead author on the report's chapter on "Industry, Settlement, and Society."
"It is clear that weather-related hazards are already increasing in some regions of the world due to climate change, and as a result, financial losses from extreme weather catastrophes, such as floods, droughts, heat waves and storms, are also increasing," said Mr. Muir-Wood
"The increases in extreme weather have placed our current systems for risk management, such as insurance, under stress," he added. "Future predicted increases in extreme weather events will require accelerating investments in adaptation strategies for human populations."
According to RMS, Mr. Muir-Wood's analysis of insurance industry and economic loss data has shown that financial losses from weather-related catastrophes have increased by an average of 2 percent per year since the 1970s, even when changes in wealth, inflation and population growth are taken into account.
The research was used by Nicholas Stern in his review of the economics of climate change to calculate that the costs of extreme weather alone could reach 0.5 percent to negative-1 percent of world gross domestic product by the middle of the century, and that the costs will keep rising as the world continues to warm.
While wealthy developed countries have much greater means than poorer nations to deal with the increased costs of weather-related catastrophes and to adapt to the changing climate hazards, Mr. Muir-Woods said even they will find it challenging to quickly and effectively adapt to the increased hazards posed by climate change.
"We can expect more situations like the flooding of New Orleans, where current infrastructure is inadequate to protect populations. In areas of rising risk, governments will be placed under increasing pressure to provide state-backed alternatives to private insurance, as has already been happening in Florida," he commented.
RMS said that in recognition of the need for continued evaluation and exploration of the financial impact of future climate risk, it appointed Celine Herweijer to the position of "principal scientist, future climate" to study the implications of future climate risk for economic, business and political decisions.
"Even if we manage to stabilize atmospheric concentrations of greenhouse gases, we are still going to have to cope with rising sea levels and, in places, increases in the severity and frequency of climate hazards for the coming decades," commented Ms. Herweijer.
"It is not only governments that will have to adapt to these greater hazards, but also businesses," she noted. "In addition to the issue of corporate social responsibility, companies must evaluate how climate change may impact their services, infrastructure and investments."
Ms. Herweijer said RMS is "examining how climate change can be accounted for in its risk models and developing ways of measuring how risk will change in the future."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.