"Prepare don't panic" advise speakers at the PCI conference
“We are not at the stage where we have to panic yet,” said Mark Way, senior vice president, Swiss Re, “but the time we have left to take effective measures is getting shorter and shorter.”
Way’s comments, made during a panel discussion on climate change at the Property Casualty Insurers Association of America (PCI) event in Boston, were echoed by Sergio Prete, vice president of catastrophe exposures at FM Global.
“We are not in panic mode yet but we need to be aware that the future is going to be full if issues and challenges and the industry needs to be aware of that.”
The panel, which also included Karen Clark, vice chair of AIR Worldwide, and Roger Pielke, professor of environmental studies at Colorado State university, was entitled “Climate change: Operational challenges and political fallout”.
Prete used the panel debate to attack the continued reluctance to address what he called the “root of the problem” – land use management.
“There needs to be a change in mindset. People have to realise that we are all at the mercy of mother nature. Remember that with Hurricane Katrina, 75% of damages could have been avoided if codes had been followed.
“Land use planning and stringent building codes are vital.”
“Models cannot give you a precise or accurate prediction
Karen Clark agreed with Prete’s assertions, pointing out that building codes had many benefits other than simply reducing insurance premiums, including the protection on consumer’s home investment and personal property.
“Good, strong building codes make a huge difference,” she added. “We need them everywhere along the US coastline, not just in Florida. And we need the political backing behind it.”
Clark also made an impassioned plea to the industry to drop return period terminology. A return period is an estimate of the likelihood of catastrophes such as hurricanes or earthquakes of a certain intensity or size.
“We should ban the return period terminology,” Clark told the audience. “It is simply misleading. It should be eliminated as it leads to so many misconceptions. Let’s just stick to probabilities.”
Earlier in the discussion, Clark had surprised some in the audience with some frank admissions about catastrophe and climate change models.
“A model is just that – a model,” she said. “It is based on assumptions. It is a guide but it cannot give you the answers.
“They cannot give you a precise or accurate prediction.”
“You have to accept that the science of climate change is advancing slowly and there is still a tremendous amount of uncertainty
Roger Pielke expanded on Clark’s themes, admitting that the scientific community had spent the majority of its time studying the long-term affects of climate change, rather than the shorter-term affects, which would be more useful for insurers and reinsurers.
“Climate change is more certain over the long-term, which I know is annoying for insurers. But you have to accept that the science of climate change is advancing slowly and there is still a tremendous amount of uncertainty.”
Pielke told delegates that he could more or less guarantee that losses will continue to increase forever as society gets richer and continues to choose to live in coastal communities.
Clark, meanwhile, added that from AIR’s research, she had discovered that there would be a “doubling of cat losses every decade from property price rises alone, let alone climate change.”
Prete summed up his feelings on the problem by asserting that nothing is being done yet to address climate change issues.
“At the end of the day, there are just too many forecasters and not enough doers.”