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The mood was upbeat at the Chatham House conference on climate change earlier this week. Five weeks before COP21 in Paris, the 21st round of UN climate talks, the buzzwords in the room included “momentum”, “turning point” and “optimism”.
As well as the usual policy wonks, academics and activists, I was struck to see top-notch reinsurance firm Munich RE — a firm that insures insurance companies — sponsoring the event alongside less surprising funders, the UK Foreign Office and the European Climate Foundation.
With a staff of 12,000 and an income of €27 billion for its reinsurance business alone, Munich RE is a big player, and takes climate change risks seriously. “Because of natural and anthropogenic changes to probability distributions for meteorological and hydrological parameters, a risk of change has resulted in the portfolios of Munich RE and its clients,” says the company’s website.
In other words, insurance firms are starting to pay the price of climate change, a diplomat told me at the event.
Between 1980 and 2014, the number of events such as storms, floods and droughts has increased from around 300 to 900 a year, causing around 850,000 deaths worldwide, of which about two-thirds occurred in the world’s poorest countries, the meeting heard. This surge also translated into losses valued at roughly US$3,300 billion, of which US$940 billion were insured.
This means businesses are increasingly joining the fight against global warming not (only) because it is good for their corporate image, but because a warmer planet is bound to make them lose money.
“Eighteen months ago it would have been different,” the diplomat told me, describing a gradual change. “Now we’re talking the language of business, of profits and losses.”
Investors are also getting increasingly on board on both public and private sides, the conference heard. Investing in oil, gas and coal is becoming riskier, one speaker said, and “you’re better off as an investor if your portfolio is fossil-free.”
As insurers get more and more involved in climate change talks, scientists may be pushed out of their comfort zone. For example, the report Climate Change: a Risk Assessment, issued in July and mentioned at Chatham House this week, takes a leaf from the financiers’ and insurers’ book to estimate climate change risks. (The report assesses for example the risk of heat stress for humans and crops, as well as indirect risks of conflict and spikes in food prices.)
“A best estimate is usually better than no estimate at all,” even if it’s an expert judgment rather than proven science, says the report, which was sponsored by the UK foreign office, among others.
In the report, Trevor Maynard, head of exposure management and reinsurance at the British firm Lloyds, says scientists should be encouraged to speculate about risk, rather than understate it. “Scientists are ‘conservative’ if they constrain their worst fears, and wait for more evidence before communicating them,” he says.
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