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Financial Risks of Climate Change

This article discusses the role of insurance in weather protection, the changing costs of extreme weather events, the implications for global capital markets, and the need for managing climate risks through emissions reduction and vulnerability assessment.

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Financial Risks of Climate Change

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  1. Financial Risks of Climate Change Dr Sebastian Catovsky Policy Adviser, Natural Perils Launch of Phase II of European Climate Change Programme 24 October 2005

  2. Role of Insurance in Weather Protection • Spreading risk • Protection for occasional, unexpected weather • Risk needs to be managed • Costs borne by society • Insured • Tax-payer • Individual

  3. Changing costs of extreme weather • Costs doubling each decade • Since 1990, $16 bn each year on average • 2004 was costliest year on record: $40 bn • UK Floods: Boscastle, Carlisle, North Yorkshire • 2005 Scandinavia Storm

  4. UK Weather Damage Claims • Claims have doubled to over £6 bn over the past six years, compared to previous period • Weather risks could increase at a rate of 2 – 4 % each year

  5. Climate change and extreme storms

  6. Implications for global capital markets Capital required could rise by two-thirds to $200 bn, increasing costs of capital

  7. European Flood Risk Annual costs could rise to €100 – 120 bn

  8. Managing climate risks: 1. Emissions

  9. Managing climate risks: 2. Vulnerability

  10. Insurance as a messenger of change Source: Munich Re

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