Lloyd’s third “360 report” does for the insurance industry what the IPCC report, see previous article, does for the whole world. It focuses attention on global warming/climate change in a way that cannot be ignored, or swept under the carpet by special interests and governments.
The report, entitled “Rapid Climate Change,” starts off with a quote from Sir David King, Chief Scientist to the UK Government: “Fact: We must either invest more in sustainable approaches to flood and coastal management or learn to live with increased flooding.”
This report takes note of the changing views on climate change since the first ‘360’ was issued last year. It’s no longer questioned that the phenomenon is real. The debate now centers on how fast it will happen and what the effects will be.
In that context Lloyd’s says in no uncertain terms: “It is vital that the insurance community has an accurate and balanced understanding which reflects the latest thinking on climate change but which avoids sensationalism. The impact of climate change is far from certain and not completely understood. However, the experts writing in this report suggest that there is sufficient probability of change occurring within our lifetime to demand our attention now. Take UK flood risk for example: the Association of British Insurers calculates that an additional 50 percent of homes in eastern England will be at risk by 2040, while the cost of damage could be reduced by 40 percent if action is taken to develop the appropriate defenses.
“Building upon our previous work, this report therefore explores what climate change could mean in four areas of particular relevance to the insurance industry: sea level rise, melting icecaps, flood and drought. We aren’t suggesting these are the only areas that could experience change in our lifetime, but they each have significant implications for the insurance industry and so we think it’s a good place to start.”
While Lloyd’s recognizes that “global models of our climate do not yet agree on regional impacts and the extreme effects of climate change,” they nonetheless do contain much useful information.” Lloyd’s wants that information available to the business and insurance community now, rather than waiting until the models may have improved.
The report is divided into five categories, as follows:
1. The insurance industry should start planning and modeling now for a higher level of losses across the world by the middle of the century as both the severity and frequency of weather events increase.
2. Sea levels will rise faster this century than last century, and the prospect of a rapid rise in sea level within our lifetime is increasing.
3. Evidence is building to suggest that large portions of ice sheets will melt in this century, speeding sea level rise further and increasing uncertainty for coastal communities about the speed and impact of climate change.
4. Floods currently account for half of all deaths caused by natural disasters, but the frequency and magnitude of flooding is set to increase within our lifetime.
5. Drought patterns are already changing in a way that is consistent with a warming world, and this is expected to continue during our lifetime.
The report then presents the scientific studies and conclusions that underlie those topical statements. This is followed by detailed analysis of the threats posed by global warming, beginning with the rise in sea levels, and continuing through a discussion of the “Destabilization of parts of the Greenland and West Antarctic Ice Sheet.”
The next section examines the problems posed by the “Frequency and Intensity of Floods” by Dr. Matt Wilson. The projected rise in flood events will effect not only the UK’s low-lying coastline, but also a number of similarly situated regions across the globe.
The opposite problem is treated next in the section titled “Climate Variability and Changes in Global Drought Intensity and Frequency,” by Dr. Richard Washington. The twin concerns – flood and drought – are related. Dr. Washington notes that “regional climate extremes occur when climate variability imposes large anomalies on the average state of the climate system. The anomalies tend to be large compared with long-term century long trends although the anomalies are not usually maintained for longer than a few months.”
For anyone, who wants to learn more about the most serious threats the world faces from climate change, and the particular effects those changes may have on the insurance industry Lloyd’s 360 Report is a good place to start. It’s full of additional references for those who wish to go further.
The report can be obtained and downloaded at: http://www.lloyds.com/NR/rdonlyres/FCA144E6-24D5-425E-B058-3A64E020E18F/0/360_RapidClimateChangeReport.pdf
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