A top insurer highlights the dire consequences that could result from global warming
When one thinks of those trying to spread the word about the risks of global warming to society, one of the most reputedly staid industries probably doesn't leap to mind. Global reinsurer Swiss Re is looking to change that image. Having long had its eye on climate change, the company co-sponsored a major report, released late last year, highlighting the potentially disastrous economic consequences of global warming.
The insurance industry makes money by successfully predicting the rates of fire, flood and other natural disasters. As a reinsurer, Swiss Re assumes the risk from primary insurers that issue policies to individuals and businesses. Climate change poses a special problem for the industry because it has the potential to dramatically change the rates of extreme weather events, perhaps to a point where insurers would not be unable to keep up. "Imagining the cascade of effects of climate change calls for a new approach to assessing risk," according to the Climate Change Futures report, issued last November. The report notes: "Insurers and reinsurers find themselves on the front lines of this challenge since the very viability of their industry rests on the proper appreciation of risk."
The report, co-sponsored by the United Nations Development Program and published jointly with the Center for Health and the Global Environment at Harvard Medical School, outlines recent trends in climate and extreme weather and traces the possible effects of two different climate change scenarios on prospects for heat waves and flooding, infectious and chronic disease, and managed and natural resources. Both scenarios are based on unchecked greenhouse gas emissions. In the first, escalating rates of extreme weather are accompanied by outbreaks of infectious disease and pests, straining many sectors of the economy and challenging the abilities of developed nations to cope.
In the second scenario, dramatic climate change leads to repeated heat waves, chronic water shortages and ecosystems pushed past their breaking points. Sudden, wide-scale disruptions to the global economy crash financial markets, as weather events create unpredictable, unmanageable risk. The report details some of the possible disruptions to the energy sector alone: blackouts during heat waves, oil distribution and power transmission undermined by repeated storms and melting tundra, and reduced capacity for hydroelectricity and cooling of power plants.
Swiss Re has a history of sensitivity to climate change concerns. The company's London building is a massive gherkin-shaped building designed to use half the energy of a typical building its size. In 2003 Swiss Re announced it was establishing a 10-year plan to become greenhouse "neutral," meaning it would reduce or offset the net carbon emissions of its employees to zero.
Last year the company joined the Chicago Climate Exchange, a voluntary market for greenhouse gas emissions trading. With the release of its 2005 report, Swiss Re called on governments and global industry to take much stronger action to mitigate the consequences of climate change: "[L]ittle action has been taken by most governments or businesses to address the potential costs of climate change. As all insurers know, however, risk does not compliantly bow to the political or business agenda."