Ocean Warming Report Reviews Implications for Re/Insurers  

Insurance Journal has a look at a report on the implications of ocean warming for insurance companies - Geneva Association Ocean Warming Report Reviews Implications for Re/Insurers.

“In some high-risk areas, ocean warming and climate change threaten the insurability of catastrophe risk,” according to one of the conclusions of a research report issued today by the Climate Risks and Insurance working group of international insurance think tank, The Geneva Association .

The report is a follow up to the facts presented at the Association’s recent conference in London, which focused on the necessity for governments and the re/insurance industry to work more closely together to take remedial measures to lessen the damages and losses caused by natural catastrophes. “There is new, robust evidence that the global oceans have warmed significantly,” said John Fitzpatrick, Secretary General of The Geneva Association. “Given that energy from the ocean is a key driver of extreme events, ocean warming has effectively caused a shift towards a ‘new normal’ for a number of insurance-relevant hazards. This shift is quasi irreversible—even if greenhouse gas (GHG) emissions completely stop tomorrow, oceanic temperatures will continue to rise.”

Falk Niehorster of the Risk Prediction Initiative of the Bermuda Institute of Ocean Science, and the lead author of the study, said: “In the non-stationary environment caused by ocean warming, traditional approaches, which are solely based on analyzing historical data, increasingly fail to estimate today’s hazard probabilities. A paradigm shift from historic to predictive risk assessment methods is necessary. As a consequence today’s hazard probabilities become more and more ambiguous and the report calls for scenario-based approaches and tail risk modeling to become an essential part of enterprise risk management.”

The report also notes that while most people think of global warming affecting the atmosphere, not the oceans; the seas are “the principle conveyor of energy around our planet. Through being the main source of water to the atmosphere, the oceans largely determine our weather patterns and provide the energy for the development of extreme events.”

According to the report, “the most significant driver to the rising of insured costs is driven by socio-economic factors, not least the increasing wealth of individuals and the increasing concentrations of development and therefore risk in coastal areas and on flood plains.”