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Munich Re Calls for New Climate Protection Initiatives

Posted on 29 Nov 2011

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Munich Re is calling for new climate protection initiatives. To boost the campaign being waged on global warming despite the stalled UN climate negotiations, a core group of countries that have already set their climate goals needs to take the lead and concentrate all their efforts on promoting renewable energy. "Switching from fossil fuels to renewable energy is the prime task this century faces and offers substantial financial opportunities", comments Torsten Jeworrek, CEO of reinsurance operations at Munich Re.

Hopes of a successful conclusion to the world climate summit, which starts next Monday in Durban, South Africa, are extremely slim. Progress may be achieved in the second negotiating track, i.e. adaptation aid for the countries worst hit by climate change. However, mankind's global warming issue would appear, under the United Nations' process, to be doomed to further failure in Durban. This would mean that the Kyoto Protocol, still the only binding climate protection agreement, although not signed by all the major economies, would expire with no follow-up agreement. The global climate situation has not changed despite considerable international efforts. Based on the latest scientific findings, little doubt remains about anthropogenic climate change and its impacts. With rising global CO2 emissions, the 2°C target that scientists consider the maximum for containing global warming within manageable limits is virtually no longer attainable.

Munich Re has been analysing climate change for nearly forty years and set up the largest database documenting natural catastrophes worldwide, which now contains over 30,000 events. The database shows that the number of registered loss occurrences from extreme weather throughout the world has almost tripled since 1980. The number of flood loss events has gone up by a factor of more than three and the number of windstorm natural catastrophes has more than doubled.

Whereas the increasing losses are primarily due to socio-economic develop-ments (population growth, rising values, settlement patterns), the strong rise in the number of weather-related catastrophes can probably not be fully explained without climate change, especially as the number of earthquakes, volcanic erup-tions and other geophysical events has only increased slightly. Prof. Peter Höppe, Head of Munich Re’s Geo Risks Research:

“It’s as if the weather machine had shifted up a gear. We believe that we can already see this in retro-spect in our last 30 years’ data for some regions, although the most severe impacts of global warming are still to come.”

Strong evidence of a link between global warming and increasing weather ex-tremes was also provided by the IPCC special report published last Friday. It emphasises that risk transfer mechanisms such as natural hazard insurance and reinsurance are key factors in the resilience of social systems to changing weather hazards. An increasingly prominent role is likely to be played by pro-jects like the Munich Climate Insurance Initiative (MCII), aimed at establishing risk transfer systems in those countries worst hit by climate change.

Munich Re does not believe a further failure at the Durban summit would neces-sarily spell the end of climate protection, as countries and companies increas-ingly perceive switching from fossil fuels to renewable energy to be the prime task this century faces, as well as the financial opportunities this presents.

Countries and companies increasingly regard switching from fossil fuels to re-newable energy as the prime task this century faces and recognise, despite the immense efforts involved, the financial opportunities it presents. Many countries are pursuing ambitious goals and this has given rise to a new industry. The changeover to renewables will be given strong backing in the next few years by the market and technical progress but this massive challenge can only be over-come if a core group of nations that have already set their climate goals now take the lead and concentrate their efforts on promoting renewable energy.

Beyond the political framework, further obstacles need to be removed from the path of renewable energy. The insurance industry can help to facilitate the intro-duction of this technology to the market by assuming specific investment risks and giving investors greater security. Munich Re is a pioneer in this field and has brought a number of innovative solutions onto the market in recent years such as performance guarantee covers for photovoltaic modules and exploration risks cover for geothermal drilling projects. Munich Re is also making a commitment on the investments side and will invest up to €2.5bn directly in renewable energy in the next few years – possibly also in the context of the Desertec vision, the realisation of which was initiated by Munich Re and its partners two years ago and has since been driven within the Dii GmbH framework.