Disaster-heavy 2008 raises pressure for climate pact, insurance

http://www.alertnet.org/db/an_art/20316/2009/00/5-174834-1.htm

05 Jan 2009 17:48:00 GMT

Written by: Megan Rowling
Cyclone Nargis survivors sit outside their shelter in Mawlamyinegyun, Myanmar, June 2008.
IFRC/John Sparrow
After December's uninspiring U.N. climate change talks in Poland, the process that's meant to lead to a new global pact in Copenhagen at the end of this year could do with a shot in the arm.

While the world waits impatiently to see how U.S. President-elect Barack Obama will tackle climate change once his administration gets up and running in late January, perhaps a few disaster statistics will help fill the gap.

At the end of December, Munich Re - one of the world's biggest reinsurance companies - said a large number of tropical cyclones, combined with May's earthquake in Sichuan, China, made 2008 one of the most devastating years on record.

Although there was a drop in the number of events that resulted in financial losses - from 960 in 2007 to 750 - the number of people affected and the scale of the losses jumped.


More than 220,000 people died as a result of natural catastrophes - including around 135,000 after Cyclone Nargis hit Myanmar in May (this figure includes those still missing) and 88,000 in the China quake. The high death toll makes 2008 the deadliest year since 2004, the year of the Indian Ocean tsunami.

And costly weather-related disasters helped push the total of economic losses to $200 billion (up from $82 billion in 2007). Adjusting figures for inflation, 2008 was the third most expensive year on record, exceeded only by 2005, which was the year Hurricane Katrina battered America's Gulf Coast, and 1995, when an earthquake devastated the Japanese city of Kobe.

Of course, the Sichuan earthquake was not caused by climate change, and it's difficult to finger global warming as the main culprit behind one-off events like Cyclone Nargis.

But Munich Re also pointed out that 2008 was a particularly heavy year for storms, which brought sea surges, flooding and high winds to the U.S. mainland. And the company stated that 2008 added to the evidence that climate change is boosting the risks of, and losses from, natural disasters.

"This continues the long-term trend we have been observing. Climate change has already started and is very probably contributing to increasingly frequent weather extremes and ensuing natural catastrophes," said Munich Re board member Torsten Jeworrek.

"These, in turn, generate greater and greater losses because the concentration of values in exposed areas, like regions on the coast, is also increasing further throughout the world."

Delving into some of the details on storms and temperatures provides a little more insight:

2008 was the fourth most severe hurricane season since reliable data have been available.
The number of tropical cyclones in the North Atlantic - at 16 - was much higher than the long-term average, and above the average of 14.7 during a warm phase that started in 1995.
Half of the windstorms in 2008 reached hurricane strength, with five classified as major hurricanes.
2008 was the tenth warmest year since the beginning of routine temperature records, and the eighth warmest in the northern hemisphere, according to provisional estimates from the World Meteorological Organisation.
This means the 10 warmest years ever recorded all occurred in the past 12 years.

Munich Re said it was "very probable" that the warming of the earth's atmosphere is due to the greenhouse gases emitted by human activity.

"The logic is clear: when temperatures increase, there is more evaporation and the atmosphere has a greater capacity to absorb water vapour, with the result that its energy content is higher. The weather machine runs in top gear, bringing more intense severe weather events with corresponding effects in terms of losses," said Peter Höppe, who heads Munich Re's research on geo risks.

"This relationship is already visible today in the increasing heavy precipitation events in many regions of the earth, the heatwaves, and the hurricanes in the North Atlantic," he added.

At the same time, Munich Re stressed the importance of sealing a new global pact this year to reduce greenhouse gas emissions, which is due to replace or extend the Kyoto Protocol from 2013.

"The next climate summit in Copenhagen must quite clearly fix the route for reducing greenhouse gases by at least 50 percent by 2050 with corresponding milestones," said Jeworrek. "If we delay too long, it will be very costly for future generations."

Yet even if governments do find the political will to agree on new emissions targets, experts agree that the global warming already in the pipeline will lead to more extreme weather in the coming decades.

That's why finding ways to protect vulnerable people - particularly the world's poorest - from potential disasters, and helping them adapt to a changing climate is judged to be an essential part of a new global deal by many developing countries.

INSURANCE FOR THE POOREST

The negotiations which inched along in Poland included significant discussions on how to insure developing countries against disasters and help them put in place prevention measures.

A proposal from the Munich Climate Insurance Initiative - a coalition of insurers, non-governmental organisations and climate change experts - outlines a mechanism to manage climate risk that could be part of the new global pact.

The proposal says premiums for insuring property and infrastructure in developing countries from large-scale extreme events would be between $3 billion and $5 billion per year. Adding insurance for medium-scale losses and prevention measures would raise the annual cost to around $10 billion.

It sounds like a lot, but if you compare it to the scale of losses in 2008 - $200 billion - the cost starts to look a little more reasonable.

What's more, although the amount of losses covered by insurance rose by 50 percent last year to $45 billion, people, companies and other entities without insurance still had to swallow massive damage worth around $155 billion.

And if you look at who bore the brunt of uninsured losses in 2008, it's quite clear the people left high and not-so-dry were those least able to cope in developing countries.

According to Munich Re's breakdown, overall losses for the Myanmar cyclone reached $4 billion, but the column showing the proportion covered by insurance is blank. The Sichuan earthquake caused losses of $85 billion, but only $300 million of that was insured.

In comparison, half of the losses from Hurricanes Ike and Gustav which hit the United States - totalling $30 billion and $10 billion respectively - were covered by insurance, as was $1.3 billion of $1.6 billion in damages caused by tornadoes there.

Three-quarters of the $2 billion losses from winter storm Emma, which brought high winds, thunderstorms and hail to large parts of Central Europe in March, were also insured.

These statistics highlight how a lack of insurance in poor countries greatly increases the risks from climate-related disasters.

A few aid agencies are already trying out medium-sized schemes that cover small farmers from the effects of droughts and floods. In November, for example, the U.N. World Food Programme and the International Fund for Agricultural Development launched a $1 million initiative with the Bill and Melinda Gates Foundation that aims to shield poor rural farmers from the impact of natural disasters and climate change.

And the Munich Re Foundation has teamed up with the German government's development agency, GTZ, to offer micro-insurance to small businesses and labourers in Jakarta who are regularly affected by river flooding. The annual premium is 4 euros and there's a payout of 25 euros if the river rises above a certain level.

"We have to make sure there is a payout for smaller losses that occur more frequently, and we need partnerships to balance out the good and bad years," Thomas Loster, chair of the Munich Re Foundation, told AlertNet at the U.N. climate talks in Poland. "We have to make (insurance) understandable to poor people."

Koko Warner from the United Nations University, who presented the Munich Climate Insurance Initiative to climate negotiators, said the international scheme could encourage more investment in micro-insurance.

"There is a lot going on but in some ways it needs a push," she said. "Governments find this (initiative) really attractive because it will help develop markets and pay for climate change adaptation."

If an international insurance facility with a focus on protecting developing countries were to be included in a global climate deal, it should at least go some way towards reducing today's stark financial inequality in disasters.

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