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Aquifers Approaching Point of No Return

New studies warn that some of the world's largest aquifers may soon run dry, with no hope of ever filling again.
By: | July 1, 2015 • 2 min read

A new pair of studies show many of the largest aquifers are being depleted at alarming rates. Out of 37 of the world’s largest aquifers, more than 21 are past sustainability tipping points, which means that the rate of withdrawal exceeds the rate of replenishment.

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Of those at highest risk, 13 are on the verge of exceeding the point at which they may not come back.

In a June 17 PBS NewsHour broadcast, Professor James S. Famiglietti of the University of California, Irvine, the lead author of one of those reports, discusses the potential impact of the dwindling supply of freshwater resources.

Famiglietti’s comments support those of experts interviewed for Aquifer: Nothing in the Bank, part of R&I’s April 2015 Emerging Risks special coverage. In the April article, experts discussed the deep impact of the depletion of California’s Central Valley aquifer on agriculture, as well as the ripple effects for real estate, construction, energy production and more.

VIDEO: Reports confirm that California’s Central Valley has been losing about 5.5. trillion gallons of groundwater per year for the last four years.

The R&I Editorial Team may be reached at [email protected]
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2015 Most Dangerous Emerging Risks

Aquifer: Nothing in the Bank

Once we deplete our aquifers, there is nothing helping us get through extended droughts. 
By: | April 8, 2015 • 6 min read
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SCENARIO: Jon Gullo eyed the monitor as the nanobots burrowed underground, searching for moisture.

He and his lawyers had managed to convince regulators to let him explore the apparently empty aquifer under his 115 acres of almond trees in California’s Central Valley.

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The nanobots were a last-ditch effort to find adequate water supplies in the face of a drought that was browning what had been the country’s richest agricultural zone.

Regulators were helping. Every other week, the U.S. Department of Agriculture collected data from satellites as they passed over the Western states. Like the nanobots, the satellites were searching, in vain mostly, for signs of water in the depleted aquifers, many of which had been pumped dry due to public and private sector mismanagement.

Now the chickens were coming home to roost. With the aquifers depleted, an economic sea-change was in the offing.

In the drought’s early years, businesses and governments invested billions in water recycling, desalination, and freshwater capture, storage and transport. They also drilled deeper and deeper into the aquifers, until stronger regulation of groundwater usage took effect. But the efforts couldn’t stop the aquifers, long a buffer against drought, from running dry.

Now the chickens were coming home to roost. With the aquifers depleted, an economic sea-change was in the offing.

Agriculture, one of the state’s biggest water users, was bearing the brunt of the shortage, and consumers paid for it at grocery stores and in restaurants. Although other areas of the world were ramping up production, fields were not producing fast enough to keep up, plus several batches of imported fruits and vegetables were found to contain traces of banned pesticides.

As the shortage continued, California’s politically powerful cities refused to take deeper cuts in their share of the remaining water supplies. And it was too costly in rural areas to pipe in water from desalination plants, or engage in the same aggressive recycling and conservation efforts used by larger metro centers.

Most of Gullo’s neighbors were already gone. His orchards were surrounded by fields of sand and dust, and abandoned food processing plants.

Undaunted, he was hoping to squeeze what he could from the depleted aquifers under his property.

The potential payoff was worth it, reasoned Gullo. Almonds were fetching astronomical prices thanks to production declines in the Central Valley, which had been the world’s leading grower.

Although he hesitated to admit it, he was frightened to try to sell his property. Few wanted to move to an area where jobs were disappearing and water was so scarce and expensive.

The dearth of homebuyers spurred by the water shortage resulted in a mini-foreclosure crisis up and down the Central Valley.

At least his county had oil and mining to fall back on, though automation and climate-change regulation had put dents in the workforce.

All newcomers could hope for were jobs in construction — fixing the damage to roads and bridges caused by the land subsidence that occurred after the aquifers ran dry.

But if there were no trucks ferrying crates of grapes, almonds and oranges, who needed roads?

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ANALYSIS: As California’s drought wears on, no needles register precisely the decline of aquifers in the Central Valley, one of the country’s leading agricultural regions.

But water levels are clearly dropping. In some areas, the land has subsided more than a foot.

Ideally, the return of normal rainfall patterns will replenish the aquifers, though a full refill could take decades. However, the odds of even longer droughts — and even more strain on underground aquifers — are rising, according to climate scientists.

They cite the impact of global climate change, as well as the geological record. Medieval-era droughts in the American Southwest lasted 30 years or more.

B. Lynn Ingram, professor of earth and planetary science, University of California, Berkeley

B. Lynn Ingram, professor of earth and planetary science, University of California, Berkeley

Aquifers served as a buffer for those populations, which nonetheless succumbed to malnutrition and conflict, said B. Lynn Ingram, a professor of earth and planetary science at the University of California, Berkeley. That buffer is shrinking today.

“It’s kind of like the water in the bank that we’re using up now,” said Ingram, author of “The West Without Water.”

It’s not just a U.S. problem. Aquifers around the world are emptying, according to research by James Famiglietti, a professor of earth system science at the University of California, Irvine. Sao Paulo in Brazil, for example, has been hit hard, with the city experiencing widespread water shortages.

While modern economies are more technologically advanced, an extended drought and continued aquifer depletion would be painful, especially for agriculture.

The U.S. could see higher food prices and disruption to supply chains, according to insurance and agricultural experts.

The U.S. food supply is becoming more resilient, thanks to interest in local farms, said Dawn Thilmany, a professor of agricultural economics at Colorado State University.

But local farmers won’t be able to make up everything, and water scarcity may not be limited to California.

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One alternative is crops genetically modified to withstand drought, experts said. More efficient water use is another. But as the globe warms, production may ultimately shift to northern states.

Imports from other countries also might make up the difference, but they bring new risks, especially if growers overseas are using pesticides or fungicides banned in the U.S., said Rodney Taylor, a managing director in the environmental services group for Aon Risk Solutions.

To guard against liability risks, food distributors and processors should scrutinize any new producers, said Tim McAuliffe, president of specialty casualty and programs for Ironshore. If crops shrink and prices rise, producers may be less rigorous about quality control.

VIDEO: California Gov. Jerry Brown announces the state’s first-ever mandatory water restriction rules.

New sources of surface water also pose a risk of contamination, as does water from deep inside an aquifer, he said. “I would call those a little more remote. But if the drought does continue at severe levels, it’s something that we would watch a lot closer.”

In California, urban areas could recycle wastewater and desalinate ocean water, said David Sedlak, a professor in the department of civil and environmental engineering at U.C., Berkeley. While costly, those efforts will keep the taps flowing.

“It’s just hard for me to imagine a situation where the cities run out of water,” said Sedlak.

Still, the shortage of water could have ripple effects. Electricity production, for example, may be stretched if dams are less productive and higher temperatures translate into greater demand.

“You could end up having situations where you have brownouts because there is so much strain,” said Kirsten Orwig, an atmospheric perils specialist for the reinsurer Swiss Re.

Risk managers will have to consider access to water when assessing supply chains and new operations, insurance executives said.

And if conditions stay dry, wildfires will worsen.

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Interstate conflicts over water will flare, too, said David Bookbinder, a partner at Element VI Consulting, which focuses on climate change policy.

Aquifers and watersheds don’t follow state boundaries, he noted. The Supreme Court usually winds up arbitrating disputes over water.

“It’s problematic that our political structure is not set up to deal with this,” Bookbinder said. “That, I think, is going to be the biggest problem.”

BlackBar

Complete coverage of 2015’s Most Dangerous Emerging Risks:

Corporate Privacy: Nowhere to Hide. Rapid advances in technology are ushering in an era of hyper-transparency.

04012015_04B_implant_devices_150px_mainImplantable Devices: Medical Devices Open to Cyber Threats. The threat of hacking implantable defibrillators and other devices is growing.

04012015_03_concussions_150px_mainAthletic Head Injuries: An Increasing Liability. Liability for brain injury and disease isn’t limited to professional sports organizations.

04012015_04_vaping_150px_mainVaping: Smoking Gun. As e-cigarette usage rises, danger lies in the lack of regulations and unknown long-term health effects.

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Aquifer: Nothing in the Bank. Once we deplete our aquifers, there is nothing helping us get through extended droughts.

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Most Dangerous Emerging Risks: A Look Back. Each year since 2011, we identified and reported on the Most Dangerous Emerging Risks. Here’s how we did on some of them.

Joel Berg is a freelance writer and adjunct writing teacher based in York, Pa. He has covered business and regulatory issues. He can be reached at [email protected]
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Sponsored: Liberty International Underwriters

Detention Risks Grow for Traveling Employees

Employees traveling abroad face new abduction risks that are more difficult to resolve than a ransom-based kidnapping.
By: | June 1, 2015 • 6 min read
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It used to be that most kidnapping events were driven by economic motives. The bad guys kidnapped corporate employees and then demanded a ransom.

These situations are always very dangerous and serious. But the bad guys’ profit motive helps ensure the safety of their hostages in order to collect a ransom.

Recently, an even more dangerous trend has emerged. Governments, insurgents and terrorist organizations are abducting employees not to make money, but to gain notoriety or for political reasons.

Without a ransom demand, an involuntarily confined person is referred to as ‘detained.’ Each detention event requires a specialized approach to try and negotiate the safe return of the hostage, depending on the ideology or motivation of the abductors.

And the risk is not just faced by global corporations but by companies of all sizes.

LIU_BrandedContent“The world is changing. We see many more occasions where governments are getting involved in detentions and insurgent/terrorist groups are growing in size and scope. It’s the right time for a discussion about detention risks.”

— Tom Dunlap, Assistant Vice President, Liberty International Underwriters (LIU)

“Practically any company with employees traveling abroad or operations overseas can be a target for a detention risk,” said Tom Dunlap, assistant vice president at Liberty International Underwriters (LIU). “Whether you are setting up a foreign operation, sourcing raw materials or equipment overseas, or trying to establish an overseas sales contract, people are traveling everywhere today for so many reasons.”

Emerging Threats Driven By New Groups Using New Tools

Many of the groups who pose the most dangerous detention threats are well versed in how to use the Internet and social media for PR, recruiting and communication. ISIS, for example, generates worldwide publicity with their gruesome videos that are distributed through multiple electronic channels.

Bad guys leverage their digital skills to identify companies and their employees who conduct business overseas. Corporate websites and personal social media often provide enough information to target employees who are working abroad.

LIU_BrandedContentAnd if executives are too well protected to abduct, these tools can also be used to identify and target family members who may be less well protected.

The explosion of new groups who pose the most dangerous risks are generally classified into three categories:

Insurgents – Detentions by these groups are most often intended to keep a government or humanitarian group from delivering services or aid to certain populations, usually in a specific territory, for political reasons. They also take hostages to make a political statement and, on occasion, will ask for a ransom.

In other cases, insurgent groups detain aid workers in order to provide the aid themselves (to win over locals to their cause). They also attempt prisoner swaps by offering to trade their hostages for prisoners held by the government.

The most dangerous groups include FARC (Colombia), ISIS (Syria and Iraq), Boko Haram (Nigeria), Taliban (Pakistan and Afghanistan) and Al Shabab (Somalia).

Governments – Often use detention as a way to hide illegal or suspect activities. In Iran, an American woman was working with Iranian professors to organize a cultural exchange program for Iranian students. Without notice, she was arrested and accused of subversion to overthrow the government. In a separate incident, a journalist was thrown in jail for not presenting proper credentials when he entered the country.

“Government allegations against detainees vary but in most cases are unfounded or untrue,” said Dunlap. “Often these detentions are attempts to prevent the monitoring of elections or conducting inspections.”

Even local city and town governments present an increased detention risk. In one recent case, a local manager of a foreign company was arrested in order to try and force a favorable settlement in a commercial dispute.

Ideology-driven terrorists – Extremist groups such as Boko Haram and ISIS are grabbing most of today’s headlines with their public displays of ultra-violence and unwillingness to compromise. The threat from these groups is particularly dangerous because their motives are based on pure ideology and, at the same time, they seek media exposure as a recruiting tool.

These groups don’t care who they abduct — journalist, aid worker, student or private employee – they just need hostages.

“The main idea here is to shock people and show how governments and businesses are powerless to protect their citizens and employees,” observed Dunlap.

Mitigating the Risks

LIU_BrandedContentEven if no ransom demands are made, an LIU kidnap and ransom policy will deliver benefits to employers and their employees encountering a detention scenario.

For instance, the policy provides a hostage’s family with salary continuation for the duration of their captivity. For a family who’s already dealing with the terror of abduction, ensuring financial stability is an important benefit.

In addition, coverage provides for security for the family if they, too, may be at risk. It also pays for travel and accommodations if the family, employees or consultants need to travel to the detention location. Then there are potential medical and psychological care costs for the employee when they are released as well as litigation defense costs for the company.

LIU coverage also includes expert consultant and response services from red24, a leading global crisis management assistance firm. Even without a ransom negotiation to manage, the services of expert consultants are vital.

“We have witnessed a marked increase in wrongful detentions involving the business traveler. In some regions of the world wrongful detentions are referred to as “business kidnappings.” The victim is often held against their will because of a business dispute. Assisting a client who falls victim to such a scheme requires an experienced crisis management consultant,” said Jack Cloonan, head of special risks for red24.

Without coverage, the fees for experienced consultants can run as high as $3,000 per day.

Pre-Travel Planning

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Given the growing threat, it is more important than ever to be well versed about the country your company is working in. Threats vary by region and country. For example, in some locales safety dictates to always call for a cab instead of hailing one off the street. And in other countries it is never safe to use public transportation.

LIU’s coverage includes thorough pre-travel services, which are free of charge. As part of that effort, LIU makes its crisis consultants available to collaborate with insureds on potential exposures ahead of time.

Every insured employee traveling or working overseas can access vital information from the red24 website. The site contains information on individual countries or regions and what a traveler needs to know in terms of security/safety threats, documents to help avoid detention, and even medical information about risks such as pandemics, etc.

“Anyone who is a risk manager, security director, CFO or an HR leader has to think about the detention issue when they are about to send people abroad or establish operations overseas,” Dunlap said. “The world is changing. We see many more occasions where governments are getting involved in detentions and insurgent/terrorist groups are growing in size and scope. It’s the right time for a discussion about detention risks.”

For more information about the benefits LIU kidnap and ransom policies offer, please visit the website or contact your broker.

Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.




LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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