Climate Change, Insurance and the New Zealand Business Community

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Climate Change, Insurance and the New Zealand
Business Community

• Issues, challenges and responses

Bruce Thomas Divisional Underwriting Officer
Sustainability Manager, Asia September 2003
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Climate Change, Insurance and the New Zealand
Business Community

• Issues
• Climate change
• the IPCC Third Assessment Report
• the Swiss Re perspective
• Global loss experience
• Some lessons we can learn

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Climate Change, Insurance and the New Zealand
Business Community

• Climate change - the IPCC Third Assessment Report
• An increasing body of observations gives a
  collective picture of a warming world and other
  changes in the climate system

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Climate Change, Insurance and the New Zealand
Business Community
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Climate Change, Insurance and the New Zealand
Business Community
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Climate Change, Insurance and the New Zealand
Business Community

• Climate change - the IPCC Third Assessment Report
• An increasing body of observations gives a
  collective picture of a warming world and other
  changes in the climate system
• Emissions of GHGs and aerosols due to human
  activities continue to alter the atmosphere in
  ways that are expected to affect the climate
  system

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Climate Change, Insurance and the New Zealand
Business Community
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Climate Change, Insurance and the New Zealand
Business Community

• Climate change - the IPCC Third Assessment Report
• An increasing body of observations gives a
  collective picture of a warming world and other
  changes in the climate system
• Emissions of GHGs and aerosols due to human
  activities continue to alter the atmosphere in
  ways that are expected to affect the climate
  system
• Confidence in the ability of models to project
  future climate has increased

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Climate Change, Insurance and the New Zealand
Business Community

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Climate Change, Insurance and the New Zealand
Business Community

• Climate change - the IPCC Third Assessment Report
• An increasing body of observations gives a
  collective picture of a warming world and other
  changes in the climate system
• Emissions of GHGs and aerosols due to human
  activities continue to alter the atmosphere in
  ways that are expected to affect the climate
  system
• Confidence in the ability of models to project
  future climate has increased
• There is new and stronger evidence that most of
  the warming observed over the last 50 years is
  attrituble to human activities

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Climate Change, Insurance and the New Zealand
Business Community
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Climate Change, Insurance and the New Zealand
Business Community

• Climate change - the IPCC Third Assessment Report
• Human influences will continue to change
  atmospheric composition throughout the 21st
  century
• Global average temperatures and sea levels are
  projected to rise under all IPCC SRES scenarios

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Climate Change, Insurance and the New Zealand
Business Community
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Climate Change, Insurance and the New Zealand
Business Community

• Climate change - the IPCC Third Assessment Report
• Human influences will continue to change
  atmospheric composition throughout the 21st
  century
• Global average temperatures and sea levels are
  projected to rise under all IPCC SRES scenarios
• Anthropogenic climate change will persist for
  many centuries
• Further work is required to address remaining
  gaps in information and understanding

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Climate Change, Insurance and the New Zealand
Business Community
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Climate Change, Insurance and the New Zealand
Business Community

• A reinsurers response
• We contribute towards finding solutions by
  managing risks and claims, supporting a climate
  friendly economy and by active communication
• When granting reinsurance cover and in
  establishing prices we take account of all risk
  factors and uncertainties
• We support states and society in developing
  management strategies by sharing know-how and
  experience
• We have a clear and positive environmental
  management strategy

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Climate Change, Insurance and the New Zealand
Business Community

• A reinsurers response

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Climate Change, Insurance and the New Zealand
Business Community

• A reinsurers response

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Climate Change, Insurance and the New Zealand
Business Community

• A reinsurers response
• We adopt an investment policy which incorporates
  ecological criteria in its pursuit of medium to
  long-term profit objectives
• We support political solutions which make
  environment friendly processes attractive from an
  economic viewpoint
• We dissociate ourselves from any projects which
  pursue other goals under the guise of ecology
• We make use of energy and commodity conscious
  management measures

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Climate Change, Insurance and the New Zealand
Business Community

• A reinsurers response
• We participate in climate change debate within
  the insurance industry and publicly
• We promote the development of knowledge and
  exchange of information
• We support ratification of the Kyoto protocol by
  all countries

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Climate Change, Insurance and the New Zealand
Business Community
Global loss experience
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Climate Change, Insurance and the New Zealand
Business Community

• Global loss experience since 1970 - events with
  cost greater that US36 million in 2002 dollars
• 1970 to 1985 - 25 to 51 events, annual average
  37
• 1986 to 2002 - 59 to 132 events, annual average
  110

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Climate Change, Insurance and the New Zealand
Business Community
Annual Insurance Losses (property and business
interruption), in USD billions (at 2002 prices)
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Climate Change, Insurance and the New Zealand
Business Community

• Insured loss Date/ Event Country(in USm at
  beginning2002 prices)
• 40,200 11.9.01 World Trade Centre attack USA
• 20,511 23.8.92 Hurricane Andrew USA
• 16,989 17.1.94 Northridge earthquake Los
  Angeles USA
• 7,456 27.9.91 Typhoon Mireille Japan
• 6,321 25.1.90 Winter storm Daria
  (hurricane) Europe
• 6,263 25.12.99 Winter storm Lothar Europe
• 6,087 15.9.89 Hurricane Hugo USA, Puerto Rico
• 4,749 15.10.87 Autumn storm (87J) Europe
• 4,393 26.2.90 Winter storm Vivian
  (hurricane) Europe
• 4,362 22.9.99 Typhoon Bart Japan

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Climate Change, Insurance and the New Zealand
Business Community

• Insured loss Date/ Event Country(in USm at
  beginning2002 prices
• 3,895 20.9.98 Hurricane Georges USA, Caribbean
• 3,200 5.6.01 Hurricane Allison USA
• 3,042 6.7.88 Explosion on Piper Alpha Platform UK
• 2,918 17.1.95 Great Hanshin earthquake in
  Kobe Japan
• 2,592 27.12.99 Winterstorm Martin Europe
• 2,548 10.9.99 Hurricane Floyd USA
• 2,500 6.8.02 Rains Flooding Europe
• 2,479 1.10.95 Hurricance Opal USA
• 2,179 10.3.93 Blizzard, Tornados USA
• 2,051 11.9.92 Hurricane Iniki Hawaii

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Climate Change, Insurance and the New Zealand
Business Community

• Global loss experience since 1970
• 18 of the 20 largest insured losses are natural
  catastrophes
• Of the 18, 16 are weather related events
• Of the 16, 14 occurred since 1990
• Of the 14, 6 occurred since 1999

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Climate Change, Insurance and the New Zealand
Business Community

• 2002 the year of the flood

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Climate Change, Insurance and the New Zealand
Business Community

• 2002 the year of the flood
• of 130 natural catastrophes recorded by Sigma, 59
  were floods
• of 11,000 deaths from natural catastrophes, 4,000
  resulted from flood
• of US11.4 billion losses from natural
  catastrophes, floods contributed US4.1 billion
• In 2002 flood losses were the highest on record

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Climate Change, Insurance and the New Zealand
Business Community

• 2002 also the year of the drought

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Climate Change, Insurance and the New Zealand
Business Community

• 2002 also the year of the drought

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Climate Change, Insurance and the New Zealand
Business Community

• 2003 the year of the heatwave
• record temperatures in Europe
• dramatice rise in death-rates in France
• the 2003 wine vintage in Burgundy the earliest on
  record
• 2003 average temperature in Sydney gt1.5 degrees
  above the average

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Climate Change, Insurance and the New Zealand
Business Community

• 2003 also the year of the fire

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Climate Change, Insurance and the New Zealand
Business Community

• 2003 also the year of the fire
• January 2003 - Canberra
• June to September Canada USA
• July/August/September Portugal France

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Climate Change, Insurance and the New Zealand
Business Community

• Some lessons we can learn
• exposure to extreme weather and climatic events
  has increased and is likely to grow
• impact is not just on physical infrastructure
• negative agricultural impacts have been felt in
  many countries and are likely to outweigh the
  positives
• regional variability has increased and this will
  have an impact on many sectors of the community
• human ingenuity allows scope for adaptation
  across the community and the economy
• natural ecosystems are the most vulnerable

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Climate Change, Insurance and the New Zealand
Business Community
Caution pays - the impact ofclimate change on
insurance

• www.swissre.com