One of GR's aims for 2007 is to encourage greater participation of its readers in the debates and issues shaping the industry. Each month, a short questionnaire will be sent out to our new "GR Benchmarking Club", with the results published in the magazine. Our first survey is on climate change and its impact on the insurance and reinsurance industry. Nick Thorpe presents the results.

Our climate is changing. Around the world extreme and unusual weather phenomena are causing scientists and industry to rethink their views on climate-related issues. But are these fluctuations the work of man - or part of a wider natural phenomenon? While science works to answer this question, a growing social and political movement is urging society and industry to accept the dynamic nature of our world's weather systems. The debate is moving on from, "Is our climate changing?" to, "What can we do to prepare for the consequences of climate change?"

Global Reinsurance asked over 180 members of the insurance and reinsurance community to provide their views on climate change and its potential impact on the industry. All responses were treated anonymously. The respondent demography drew from all facets of the insurance and reinsurance industry - from consultants to insurers, brokers to reinsurers, and geographically, from New Zealand to Malta.

Climate critical

Dr Steve Smith, vice president of ReAdvisory, asserts that climate change is a critical issue for the insurance and reinsurance industry. "There's an old adage that 'climate is what you expect, weather is what you get'," says Smith. "Well if our expectation for the climate is changing then our expectations for the weather and, more importantly, the extreme weather events will also need to change accordingly."

When asked how important an issue climate change was to the insurance and reinsurance industry, 91% of respondents agreed that it was either "very important" or "important". One respondent from a large US-based insurer said that the "insurance industry will be directly affected by climate change" and therefore "had a duty" to provide funding for research into new technologies to reduce carbon emissions. Meanwhile, others blamed overdeveloped coastlines for the increased impact of extreme weather conditions on the insurance industry. "As a company we take climate change very seriously," said Robbie Klaus, CEO of Glacier Re. "We have an earthquake and weather specialist inhouse to monitor all current research, to allow us to make informed underwriting decisions."

When it came to the insurance industry lobbying governments on climate issues, the response was equally strong, with 84% of respondents agreeing that the industry should pressure policymakers. One environmental consultant said governments should levy a "tax on products made in polluting factories, primarily in the US and China". But former US presidential candidate Al Gore, in his film An Inconvenient Truth, refutes the suggestion that governments should be made accountable for their citizen's actions. "This is not a political issue, this is a moral issue," he says. "If we allow this to happen, it will be deeply unethical."

As green issues continue to dominate public debate, more and more firms are adopting environmentally-friendly policies in their corporate ethos. Although 36% of respondents were either not aware of their company actively addressing climate change or said their company had no such policies, 64% could identify at least one project geared towards reducing their firm's impact on the environment. As illustrated by figure 1, of these, 23% recognised that their company had "green" policies, ranging from recycling initiatives to power-saving schemes. A further 16% said their companies adhered to sustainable business practices while 14% of respondents claimed their employers actively invested in climate change research. Companies investing in climate change research tended to be large, well-established insurers, reinsurers and brokers. Those adopting "green" policies were more likely to be public sector organisations.

Global pressures

The insurance and reinsurance industry has a symbiotic relationship with natural catastrophes worldwide. One need only look at the impact of Hurricane Katrina in 2005 to appreciate the fear that climate change may be behind the increase in mega catastrophe events and the escalation in insured losses from such events. Seventy percent of respondents believed that adverse or freak weather conditions worldwide could be attributed to climate change, though conversely, 49% also believed that the increase in adverse conditions could also be attributed to natural cycles. The unifying theme among those that disagreed with both hypotheses was the confusion surrounding research. One respondent from a UK business continuity consultancy complained of "far too much conflicting data and information circulating on (climate change)", going on to suggest that the first step should be a globally agreed and qualified positioning statement.

Another respondent highlighted the perceived "peer pressure" on companies to act in a certain way, even if they do not themselves understand or believe in the cause. "Such is the overwhelming power of current conventional 'wisdom'," pointed out the respondent, "that unless they are to be put into the category of 'climate change deniers' alongside 'Holocaust deniers', commercial organisations have no choice except to be seen as acting responsibly on green issues." There is a clear gap in the levels of acceptance and debate in different parts of the world too, pointed out Ivo Metzinger, head of sustainability for Swiss Re: "There is still a gap between Europe and the US in terms of acceptance and action regarding climate change and global warming, although there have been encouraging signs from the US recently."

Following the growth of government-led pool schemes such as the Florida Hurricane Catastrophe Fund and the Terrorism Risk Insurance Act in the US, it was perhaps unsurprising that 49% of respondents thought governments should provide some form of backstop in insuring against catastrophes (figure 2). A further 36% disagreed with the idea of a government backstop, but agreed that there should be political involvement of some sort. Only 14% of all respondents thought that ultimate responsibility lay with the private sector. One respondent said the insurance industry was ill-equipped to cope should the worst predictions on climate change occur, adding that "there is definitely a need for government intervention when it comes to large scale catastrophes."

Thoughts to chew on

The Global Reinsurance survey was not designed to explore such a wide issue in great depth, but to take a snapshot of current attitudes to climate change within the industry. Responses show a general acceptance of topical issues associated with climate change and global warming; although not all accept the realities, as one respondent from a Fortune 500 energy services company illustrated: "The media ... overhypes global warming and the general public, which has little or no time or inclination to research the subject, buys into it."

Certainly the survey highlighted the continuing confusion about the actual facts and figures, due in part perhaps to the proliferation of complex scientific evidence. One thing is certain though, generalising about the possible and probable effects of climate change is impossible. "You cannot exactly map the affects of climate change," confirmed Jacques Aigrain, CEO of Swiss Re. "To come to a clear conclusion of a long-term trend is very difficult and there is a very high degree of uncertainty." As science continues to explore the complex mechanisms governing the world's climate systems, our survey reveals the industry largely accepts the fact that our global climate is changing, whatever the underlying cause may be.

- Nick Thorpe is senior reporter of Global Reinsurance.


- To join the GR Benchmarking Club visit

- For information on attending "Climate Change 2007" on 12-13 March 2007 in London, visit