Climate Change and Trends of Natural Disasters – What Is to be Done

1. Climate Change and Trends of Natural Disasters – What Is to be Done 2nd Conference of the OECD International Network on the Financial Management of Large Scale Catastrophes Peter Hoeppe Geo Risks Research/Corporate Climate Centre

2. Munich Re • Insurer for Insurances • Founded 1880 • One of the leading reinsurance companies • Covering risks of natural hazards is part of the core business

3. Munich Re the First Alerter to Global Warming MR-Publication Flood / Inundation (August 1973) © January 2007, Münchener Rückversicherungs-Gesellschaft, Geo Risks Research

4. Origins and Types of Natural Catastrophes • Extraterrestrial: Meteorites • Geophysical (terrestrial): Earthquakes, volcano eruptions, tsunamis • Atmospheric (weather): Windstorms, floods, storms, hail, lightning, avalanches, mud slides • No human influence • No human influence • Pieces of evidence for human influence, risk of change!

5. Trends of Natural Disasters The last years have brought records in natural disasters in respect to: Intensities Frequencies Damages and losses

6. extreme high moderate light comfortable moderate high extreme light Heat wave of 2003, with more than 70,000 fatalities the largest humanitarian natural catastrophe in Europe for centuries Perceived Temperature on 8 August 2003 and excess mortality Heat stress 300 2.300 9.400 19.500 1.000 800 20.100 Cold stress 2.700 15.000 Sources: Robine et al., 2007; German Weather Service, 2004

7. August 2005 – Hurricane Katrina6th strongest hurricane, largest losses of a single event source: AP 25.-30.8 Hurricane Katrina, USA (1.322 fatalities) Economic losses (US$ m): 125.000 Insured losses (US$ m): 61.000 (NFIP included)

8. July 2005 – Mumbai Flood On 26th July 2005 the meteorological station at Santacruz in North Mumbai (India) recorded 944 mm of rainfall within 24 hours, the highest ever in the history of precipitation recordings in India. Economic losses (US$ m): 5.000 Insured losses (US$ m): 750 Fatalities: 1150

9. Flood series in the UK, June- July 2007Largest flood loss ever! Overall losses: > US$ 8 bn Insured losses: US$ 6 bn Source: www.metoffice.gov.uk/weather/seasonal/summer2007/index.html

10. Tropical Cyclone Nargis, May 3, 2008 Wind velocities up to 215 km/h (Cat 4) Floods in the Irrawaddy delta, also Yangoon affected Human catastrophe Estimated number of fatalities about 100,000 Source: http://www.reliefweb.int © 2008 Münchener Rückversicherungs-Gesellschaft, GeoRisikoForschung, NatCatSERVICE

11. Victoria Wildfires, Australia (Black Saturday Fires)February 2009 Wildfires, February 2009 Overall losses: US$ 1,300m* Insured losses: US$ 650m* Fatalities: 173 *Losses in original values Source: Reuters, Berlin © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June 2009

12. Munich Re NatCatSERVICE – One of the world‘s most comprehensive databases on natural catastrophes • From 1980 until today all loss events • For USA and selected countries in Europe all loss events since 1970 • Retrospectively all Great Natural Catastrophes since 1950 • In addition all major historical events starting from 79 AD – eruption of Mt.Vesuvio (3,000 historical data sets) • Currently more than 26,000 events documented Natural catastrophes 2008 Earthquake, tsunami,volcanic eruption Storm Flood Extreme temperature (heat wave, forest fires) Great natural catastrophes: Earthquake China Hurricane Ike Cyclone Nargis Winter damage China © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June 2009

13. Natural catastrophes in Asia Great natural catastrophes in Asia 1950 – 2008 Geophysical events(earthquake, tsunami, volcanic activity) Hydrological events(flood, mass movement) Meteorological events (storm) Climatological events(extreme temperature, drought, wildfire) © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As at September 2009

14. Natural catastrophes 2008 Weather catastrophes in Asia 1980 – 2008Number of events Meteorological events(Storm) Hydrological events(Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE – As at September 2009

15. Global natural disasters 1980 – 2008Geophysical, meteorological, hydrological events Number Geophysical events (Earthquake, tsunami,volcanic eruption) Meteorological events(Storm) Hydrological events(Flood, mass movement) ----- Trend line © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE

16. Climate change probably has a significant impact on increases of nat cat losses, especially in North America and Asia/Australia. Annual growth rates of nat cat losses and climate component • Comments • These data are indicative only – a more precise determination of the regional loss drivers related to climate change is needed (e.g. via LSE cooperation) • Nat cat loss trend: growth rates of original/nominal values and not adjusted for inflation • Climate component: actually “Climate plus X” because influencing factors include anthropogenic climate change, natural climate variability, changes in vulnerability and changes in population distribution

17. Global Warming is Real!Continental Temperature Changes Quelle: IPCC FoAR, 2007 Black lines: decadal averages of observations Blue band: 5-95% range 19 simulations from 5 climate models using only natural forcings Red band: 5-95% range for 58 simulations from 14 climate models using natural and anthropogenic forcings

18. Climate Change and Extreme Weather Events (IPCC, 2007) very likely > 90% likely >66% more likely than not > 50%

19. Trends of heavy precipitation events during summer monsoon in India Source: Goswami, B. N. et al. (2006), Science 314

20. 140 cm A1FI B1 50 cm Increase of Sea Level for different CO2-Scenarios Quelle: Rahmstorf (2007), Science, 315, 368 *Basis: Range of ΔT = 1.5º-5.8ºC (IPCC TAR)

21. Observed changes in sea surface temperatures NATL = North Atlantic WPAC = West Pacific SPAC = South Pacific EPAC = East Pacific NIO = Northern Indic SIO = Southern Indic Source: Webster et al. (2005), Science, 309

22. Residence Time of Greenhouse Gases in the Atmosphere Source: IPCC, diverse

23. Munich Re as a risk carrier © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June 2009

24. DESERTEC Conceptfor Energy, Water and Climate Protection © 2009 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE. As at June 2009

25. DII Founding Meeting at Munich Re13 July 2009

26. Desertec Industrial Initiative (DII) 12 companies signed a Memorandum of Understanding to establisha Desertec Industrial Initiative (DII). The objective of this initiative is to analyse and develop the technical, economic, political, social and ecological framework for carbon-free power generation in the deserts of North Africa.

27. Insurance Linked Adaptation to Increasing Weather Extremes in Developing Countries MCII Munich Climate Insurance Initiative (MCII) MCII was founded in 2005 on initiative by Munich Re Today MCII is a registered non profit organisation with members from:Insurance, NGOs, Relief Organisations, Research Institutes, World Bank and independent experts. Objectives: Develop insurance-related solutions to help manage the impacts of climate change in developing countries. Recent activities:MCII-Submission to UNFCCC with concrete suggestions of insurance tools to be implemented in a Post-Kyoto-Protocol. Suggestions are being discussed by delegates of the climate negotiations on their way to Copenhagen.

28. The MCII Proposal InsurancePillar TIER 1Climate InsurancePool InsurancePillar TIER 1Climate InsurancePool High LayerRISK High LayerRISK Premiums paid by AF ($5 bn) RISK MANAGEMENT MODULE RISK MANAGEMENT MODULE Middle LayerRISK TIER 2 Support for micro and macro insurance systems Middle LayerRISK TIER 2 Support for micro and macro insurance systems Support financed by AF ($2 bn) Low LayerRISK Prevention Pillar Low LayerRISK Prevention Pillar Support financed by AF ($3 bn) mainly mainly • The two-tiered insurance pillar • Meets the principles set out by the UNFCCC • Provides assistance to the most vulnerable, and • Includes private market participation. Rough estimated annual costs: $ 10 bn

29. Evaluatingtheeconomicsofclimaterisks & opportunities in theinsurancesector Collaboration between Munich Re and the London School of Economics • Main areasofresearchactivities • quantifying the costs of a climate-related increase in natural catastrophes • dealing with the uncertainties of climate models • evaluating the potential and consequences of emissions trading systems and the appropriate design of such schemes • estimating the economic impacts of climate change on the BRIC states (Brazil, Russia, India, China) Institute: Centre for Climate Change Economics and Policy at LSEChair: Lord Nicholas SternManagement: Prof. Rees (LSE), Prof. Gouldson (Leeds)Project duration: 2008-2012Sponsoring: £3m (~ €4m)

30. Conclusions • Natural catastrophes, especially weather related events, are increasing in number and magnitude especially in Asia. • Global warming is real. • There is more and more scientific evidence for causal links between climate change and increasing frequencies and intensities of natural catastrophes. • We have to mitigate global warming and adapt to the changing risks in respect to the regionally specific risk patterns. • In Copenhagen ambitious CO2-reduction targets should be fixed to avoid dangerous, unmanageable climate change. • The Copenhagen outcome should provide adaptation funds for developing and emerging countries, including new insurance solutions. • The insurance industry supports climate change mitigation and adaptation measures by sharing its knowledge with the public and providing custom made covers for innovative technologies.

31. Thankyou!