Insurance companies plan ahead for climate-related disasters

A future on Earth of more extreme weather and rising seas will require better planning for natural disasters to save lives and limit deepening economic losses, the United Nations said…in a major report on the effects of climate change…The 594-page report, with authors from 62 countries, is the world body’s most up-to-date assessment of climate change risks. Its general message is that enough is known about these risks for policymakers to start making decisions about how to deal with them…

Global reinsurer Munich Re said that since 1980, weather-related disasters worldwide have more than tripled.

Lindene Patton, chief climate product officer for Zurich Financial Services, said the report was particularly useful for insurers who rely on its scientific assessments “to assist our customers to live and work successfully in the natural world.”

The report sidestepped the politically divisive issue of tougher action on curbing greenhouse gas emissions blamed for stoking global warming. U.N. climate talks have become bogged down over who should take most responsibility for action. Instead, it aimed to push adaptation to a warmer world, offering a range of strategies…

The report looks for “low regrets” strategies that not only protect those in the path of natural disasters but also boost sustainable development. These include early warning systems, better drainage, preserving ecosystems such as mangroves, forests and water catchments, plus better building standards and overhauling health systems.

Spreading financial risk of disasters was another tool to limit the already-strained cash reserves of many poorer nations.

Micro-insurance, catastrophe bonds, national and regional risk pools could help to finance rebuilding and recovery. While take-up rates for insurance were increasing in poorer nations, the rate was still low compared with wealthier states. Remittances, officially estimated at $325 billion in 2010, were another crucial form of finance and risk sharing, but more steps are needed to cut transaction costs.

Insurance groups said the report confirmed their experience of rising costs from climate-related disasters.

“U.S. property and casualty insurers, who are on the front line on this issue, saw catastrophe-related losses double in ’11, while their net income was cut in half,” Cynthia McHale, insurance program director at Ceres, an investor coalition, said in a statement…

Risks also vary widely, from the threat of more droughts and wildfires in Australia and melting permafrost damaging buildings and roads in the Arctic to heat waves in southern Europe…

Most deaths from natural disasters – 95 percent between 1970 and 2008 – still occur in developing countries, the report found…

Losses from disasters were substantially higher for developing nations, with middle-income countries suffering losses of 1 percent of GDP between 2001 and 2006, compared with 0.1 percent for high-income countries.

While Luddite conservatives fritter away on well-funded mountaintops, insurance companies are putting their actuaries to work to prevent bankruptcy resulting from the failure of government and bureaucrats to act.

It’s already clear enough to the industry which makes a living from disasters – and consequently walks a fine line between profit and financial ruin – that know-nothing ideology isn’t going to be any help when claims are already rising at predicted levels.

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