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  • Climate change

    One of humanity’s greatest challenges – Our approach

    Climate change, predominantly the result of human activity, is real and has a major influence on weather-related natural disasters. It can dramatically alter a region’s risk situation in terms of severe storms, thunderstorms, floods or droughts. A thorough understanding of climate change is essential for an insurer's risk management.

    Munich Re is a pioneer in analysing the impacts of anthropogenic global warming and natural climatic variability on losses caused by weather-related natural disasters. For the past four decades, we have researched risks, loss prevention measures and new risk transfer solutions. In addition, we examine long-term data on meteorology and losses to better understand changes in risk.?

    Climate crisis alters the risk landscape

    The consensus among scientists is that the emissions of anthropogenic greenhouse gases since industrialisation began are the main cause of rising temperatures in our planet’s atmosphere and oceans. Global warming has various consequences.?
    Deviation in global mean temperature from the 1880-1900 average
    All 18 years since 2001 rank among the 20 warmest since measurements began

    Sea ice and glaciers are melting. Sea levels are rising, currently at an annual average of some 3 mm.??

    Higher temperatures – and the correspondingly higher energy content in the atmosphere – change the probability distributions of individual meteorological parameters and weather patterns. This is especially significant from a risk perspective.

    If weather extremes occur more frequently and/or become more intense, then there will be more losses – unless measures are implemented to minimise losses. Construction engineering measures come to mind, as do changes in land use.?

    It is very probable that climate change has played a role in severe hailstorms in North America and Europe, wildfires in California and heatwaves in many places.

    Referred to as hurricanes, typhoons or cyclones in different parts of the world, more and more tropical cyclones have brought extreme precipitation in recent years. There are also signs that particularly severe storms account for a rising percentage of all storms.??

    Individual loss events cannot be attributed directly to climate change.?Nevertheless, the analysis of long-term trends?on the basis of?meteorological data – in combination with underwriting and socio-economic data – provides key indications of?the changing?risk?from?dangerous storms.

    Climate change and greenhouse gases: A simple explanation of a complex process

    Decisive action needed

    The repercussions of the climate crisis directly affect the insurance industry. Weather extremes cause crop losses as well as considerable damage to buildings and infrastructure. There are two main challenges:

    Recognising changes in catastrophe risks

    Here the focus is on first identifying risks of change in insurance and investments. Experts then develop solutions for loss minimisation, risk transfer and the management of investment portfolios.

    Slowing the pace of climate change

    The climate crisis means that decisive action is essential to keep global warming well below an increase of 2°C compared with pre-industrial levels. In fact, the international community defined this objective in the Paris Agreement of 2015, under the auspices of the United Nations. Achieving this target requires new technologies for power generation, transportation, energy storage and industrial production. We therefore focus on crafting insurance solutions for such technologies, smoothing the path to market entry.

    Solutions for assessing and managing risks

    Munich Re has traditionally focused on covering peak risks associated with natural disasters. In the interest of?facilitating?adaptation to climate change?and fostering climate-friendly technologies, we?both?drive forward initiatives?on?loss minimisation and prevention,?as well as?develop innovative risk?transfer solutions. More widely available insurance covers, particularly in emerging and developing countries, can make it easier for countries and individuals to handle the financial impact of natural disasters.

    Reinsurance solutions

    Industry solutions

    Contact our experts
    Ernst Rauch
    Head of Climate & Public Sector Business Development
    Eberhard Faust
    Head of Research: Climate Risks and Natural Hazards
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