The insurance market has been paying for global warming for the last four decades whether it's known it or not. Insurance and economic loss data show that the costs of weather-related catastrophes have increased by 2 percent per year since the 1970s, according to recent analysis from catastrophe modeling firm Risk Management Solutions Inc. This trend holds true even with wealth redistributions, population growth and inflation factored in.
With this analysis in mind, Sir Nicholas Stern estimated that extreme weather costs might total as much as 1 percent of the global gross domestic product by midcentury, a figure offered in the report released in February by the head of the government economics service and adviser to the U.K. government on the economics of climate change and development.
RMS claims that climate change is playing a hand in making weather more hazardous, and that this relationship will only grow more expensive and dangerous as time goes on. Even at present the costs of extreme weather are stretching thin the current insurance system, said Muir-Wood in an announcement released on April 6, the same day the Intergovernmental Panel on Climate Change issued its Summary for Policymakers. Muir-Wood was a lead author for a chapter in the IPCC report titled "Industry, Settlement, and Society."
Floods, heat waves, droughts and, of course, hurricanes--as they increase in intensity and frequency in the future--will stress society's infrastructure and insurance system only more. Poor countries will suffer more, but rich countries could also find coping difficult. Situations like Hurricane Katrina in New Orleans in 2005 and the emergency legislative session in Florida in 2007 already demonstrate the impact of extreme weather, says Muir-Wood.
Even if action is taken to control greenhouse gas emission today, the sea levels will still rise and climates will shift due to past emissions.
"It is not only governments that will have to adapt to these greater hazards, but also businesses," said Celine Herweijer, principal scientist, future climate, at RMS, in the statement. "In addition to the issue of corporate social responsibility, companies must evaluate how climate change may impact their services, infrastructure and investments."
June 1, 2007
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