A leading expert has said climate change has ensured natural catastrophe events can no longer be described as “black swans”.
In a new white paper from Munich Re US Raghuveer Vinukollu, Nat Cat Strategic Products Team Lead, Munich Re US, said the world needed to create long term strategies to take the threat rather than seek to deliver short -term fixes for events after they happen.
Mr Vinukollu said: “Climate change is one of the greatest long-term risks in the insurance industry, and the early impacts are already here—right now.
“As the COVID-19 pandemic has illustrated, the best course of action is preparation on an ex-ante basis rather than an ex-post one. Severe flooding, devastating wildfires and hurricanes… no place on earth is immune to extreme weather events. There is strong evidence that climate change has already had a significant influence on the frequency and severity of some types of natural disasters and extreme weather events in regions across the world. Society needs to act immediately to mitigate and adapt to the effects of climate change if we want to strengthen our resilience.”
The white paper, Reimagining Resilience in a Post Pandemic World, said the COVID-19 pandemic has led to societal and economic disruption on a global scale, and climate change is also expected to result in far-reaching societal and economic impacts. Therefore, lesson could be learned from the COVID pandemic which could be put to good use in the fight against the impacts of global warming.
It stated pandemics and the future catastrophes that climate change could create are both systemic by nature. They also highlight the need for longer-term prevention strategies that are often side lined in favour of short-term priorities.
“If vulnerable regions continue to deprioritise long-term strategies, the risk of unexpected and severe global disruption due to extreme weather will likely exacerbate,” warned the report. “Extreme weather might also widen the protection gap that already exists between economic and insured losses if steps are not taken to reduce the vulnerability of property and adapt to the changing risk landscape.”
“Extreme weather events are not anomalies or black swans, but more like gray rhinos,” said Mr Vinukollu. Gray rhinos, a term popularised by the American policy analyst Michele Wucker, are events that are highly probable, highly impactful and often neglected. “Extreme events, such as a pandemic or a natural catastrophe, may seem like they are once-in-a-lifetime black swan events, but they are not. Urbanisation, deforestation, resource consumption and mass travel have the potential to make these events more common, especially if our collective behaviour remains unchanged.”
The importance of embracing gray rhino events was evident in the COVID-19 response, added the report. Those countries that understood the risks associated with a global pandemic were the most prepared, suffered less disruption and were able to return to everyday life more quickly. A greater acceptance of climate change and the risk of gray rhino events opens the door for governments, enterprises and others to build resilience.
“Climate change can feel daunting, but we are in a critical period where powerful steps need to be taken to help make society resilient against future catastrophes and mitigate the impacts of living in a warmer world,” said Mr Vinukollu. “It took a virus only a few months to give our modern world its first experience in understanding what global societal and economic disruption looks like. The world has known about the disruptions climate change may cause for decades. Right now, we have the unique opportunity to reimagine how businesses function, redesign standards and practices, and strengthen the relationships and knowledge sharing between the multitude of parties that have a stake in climate change and resilience. There is power in partnerships. We only stand to lose if we collectively choose to do nothing.”
“The work to promote resiliency in the face of climate change must be collective in nature, with the insurance industry having an important role to play,” said the report. “Better risk transfer solutions and a higher take-up rate of insurance across communities means a faster recovery. The insurance industry has an advanced understanding of climate risk and extreme events, and its modelling, analysing and forecasting capabilities offer vital insights to other participants in the resilience ecosystem, helping them better comprehend the risks, identify potential weaknesses and plot a course toward prevention.
“Education and expertise in risk assessment can guide governments and businesses towards making meaningful policy shifts such as improved building standards and land-use practices. This new generation of technologies, practices and standards will help reshape the way society mitigates and manages the risks of climate change.”