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Climate change ‘tipping points’ dangerously close, with severe insurance implications


November 27, 2009   by Canadian Underwriter


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Climate change will not happen in a steady, predictable fashion, but rather in an unpredictable manner, potentially costing hundreds of billions of dollars in damages, according to Major Tipping Points in the Earth’s Climate System and the Consequences for the Insurance Sector.
The report, commissioned by Allianz and World Wildlife Federation (WWF), explores a number of ‘tipping points,’ that when reached, will set off a negative chain reaction, with serious implications for the insurance sector.
For example, the melting of the Greenland and the West Antarctic Ice Shield could lead to a tipping point scenario. This ‘tipping point’ could lead to a sea level rise of up to 0.5 metres by 2050.
This sea level rise is estimated to increase the value of assets at threat in all 136 global port mega-cities by more than US$28 trillion.
Also, California is likely to be affected by increasingly severe droughts and levels of aridity. The annual damages caused by wildfires could be tenfold compared to today’s costs and could reach up to US$2.5 billion per year by 2050, and US$14 billion by 2085, the report warns.
“As an insurer and investor, we must prepare our clients for these scenarios as long as we still have leeway for action,” said Clemens von Weichs, CEO of Allianz Reinsurance.
“Setting premiums risk-appropriately and sustainability is of vital interest to everyone involved, because this is the only way to ensure that coverage solutions will continue to exist.”


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