5 lessons in 5 charts: resilience in an age of climate extremes
These five graphs show what we need to know about climate risk trends
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Bushfires in Australia, typhoons in Japan, flooding in many areas of the world – recent natural catastrophes point to a world increasingly at risk from climate change.
The main reason for this is the dovetailing of two trends: a warming climate and global economic growth, particularly urbanisation and development. Increasingly, we're building, living and working in the very places most exposed to the impacts of global warming, namely in expanding urban centres along the coast, on flood plains and near forested wildland. Meanwhile, climate change effects are increasingly evident as a major risk factor and likely to expand losses from weather-related disasters in the coming decades, according to Swiss Re Institute's newest sigma publication.
If we don't adapt, these developments could jeopardise global resilience at a time when our planet is already under great strain and call into question the insurability of future risks. If, however, we understand today's trends and act now to mitigate the risks, we'll be much better prepared to cope with a world of climate extremes.
These five graphs offer lessons to consider.
2019 catastrophe losses in a nutshell
Number of weather-related events and losses, 1970-2019
Economic losses from extreme weather events, 1980-2019
Global economic versus insured losses, 1980-2019
5. Climate change is a manageable risk for the insurance industry. But risk modelling and underwriting processes need to overcome "historic loss bias" and adapt to maintain future insurability.
Climate change effects remain insurable today. But the long-term risk of unmitigated climate change could undermine the insurability of assets, particularly in highly exposed regions. The main underwriting risk for insurers is to underestimate premiums due to reliance on historical loss data or incomplete/outdated models. The industry therefore needs to actively embed and dynamically track the effects of the warming climate, adapting models to a profoundly changing risk landscape. Many catastrophe models do not fully account for rising exposure from increased value concentration in a rapidly urbanising and more vulnerable world.