How you pay for tomorrow's scares, today

by | Jan 12, 2009 | Articles

In a remarkably gullible news item, the BBC reported that 2008 was a ‘huge year for natural disasters’. “The past year has been one of the most devastating ever in terms of natural disasters… climate change [is] boosting the destructive power of disasters like hurricanes and flooding,” it proclaimed.

This was drawn from a report that found that although there were fewer “loss-producing events” in 2008 than in the previous year, the impact of natural disasters was higher. It claimed that more than 220,000 people died in events like cyclones, earthquakes and flooding, the most since 2004, the year of the Asian tsunami. Global losses totalled about $200bn (£137bn), with uninsured losses totalling $45bn, about 50 per cent more than in 2007, the report claimed. All of which made 2008 the third most expensive year on record, after 1995, when the Kobe earthquake struck Japan, and 2005, the year of Hurricane Katrina in the US.

And why would that be? The BBC article quoted expert Torsten Jeworrek, who claimed: “Climate change has already started and is very probably contributing to increasingly frequent weather extremes and ensuing natural catastrophes.”

Thing is, Torsten Jeworrek is an expert in insurance, not climate. He is on the board of insurance giants Munich Re. And Munich Re are the authors of the new report.

It goes without saying that insurance companies need to keep abreast of developments in risk if they are to provide a service for their clients. But it also goes without saying that generating alarm about those same risks is also to their advantage. Indeed, Munich Re says as much on its website:

Risk is our business: Among other things, we reinsure the risks connected with oil rigs, satellites and natural catastrophes, and those arising from the use of genetic engineering and information technology or from the management of companies.

Climate change is not the only issue Munich Re is whipping up alarm about. It also desires that we flap over other scares du jour, such as piracy…

Piracy reaches new dimensions: The frequency and severity of piracy attacks have reached alarming levels

…terrorism…

Megacities extremely vulnerable to natural perils, technological risks, terrorism and environmental hazards

More risk awareness and greater transparency urgently needed with regard to hazard exposure

Munich Re presents its views at the UN’s World Conference on Disaster Reduction

…and obesity:

Obesity and type 2 diabetes are spreading at an alarming rate around the world

But, mostly, it’s climate change…

10 April 2008 India: Increase in losses due to climate change / Board member Torsten Jeworrek: “In coming decades, the effects of climate change will make themselves felt particularly in emerging countries like India.”

… and climate change …

29 September 2008 Munich Re exhibition in Tokyo highlights risks and opportunities of global warming

… and climate change …

27 December 2007 Natural catastrophe figures for 2007: Higher losses despite absence of megacatastrophes, very many loss events / Overall economic losses of US$ 75bn / Board member Dr. Torsten Jeworrek: Loss figures in line with the rising trend in natural catastrophes, Munich Re is prepared

… and climate change …

July 2008 High death toll marks the 2008 half-year natural catastrophes figures

… and climate change …

5 June 2007 Munich Re signs the “Declaration on Climate Change” of the United Nations Environment Programme Finance Initiative.

Munich Re Board member Torsten Jeworrek: “Climate change is one of the greatest challenges of our time. What we do today is crucial for future generations.

Therefore, swift international action is urgently needed.”

… and climate change …

Munich Re forecasts long-term increase in demand for risk protection as a result of climate change and growing concentrations of values.

And there’s plenty more climate change where those came from.

Munich Re is certainly not the first insurance company to try to cash in on climate alarm by generating more of it. Back in April 2007 Ben Pile and I reported on the efforts of risk assessment giants Risk Management Solutions (RMS) to do the same. Bob Ward, RMS’s Director of Global Science Networks, was continuing a crusade against the dirty denialist industry – namely, Exxon and Martin Durkin – that he started while in his previous employment as Senior Manager for Policy Communication for Exxon-slayers the Royal Society.

What is surprising is that the BBC have deemed the witterings of an insurance company worthy of a news story, and moreover, that they have chosen to take those witterings entirely at face value. At the very least they could have wondered why earthquakes were lumped into the analysis or how much the figures were skewed by one devastating cyclone in Myanmar.

Or they could have drawn on the academic literature. An article published in 2007 in the journal Science concluded that:

global weather-related economic losses (inflation adjusted, 2006 dollars) have increased from an annual average of U.S.$8.9 billion from 1977–1986 to U.S.$45.1 billion from 1997–2006. However, because of issues related to data quality, the low frequency of extreme event impacts, limited length of the time series, and various societal factors present in the disaster loss record, it is still not possible to determine the portion of the increase in damages that might be attributed to climate change brought about by greenhouse gas emissions (S1). This conclusion is likely to remain unchanged in the near future.

Torsten Jeworrek’s quotes – like the whole BBC story, in fact – are lifted directly from Munich Re’s press release. But then, perhaps the BBC didn’t have much choice (other than to ignore the story completely) because Munich Re haven’t actually made their report available. When we emailed them for a copy, media relations officer Alexander Mohanty replied that “there is no additional report or publication. Munich re’s annual report on natural catastrophes is a press relase only traditionally. But we will publish a more in-depth report in March called ‘topics’.”

Höppe springs eternal

Intriguingly Jeworrek’s Munich Re colleague Peter Höppe, who is also quoted by the BBC, is an author of the Science paper cited above, which stresses the current impossibility of attributing natural disaster losses to the effects of global warming. At the Prometheus blog, Höppe’s co-author on the Science paper, Roger Pielke Jr from the University of Colorado, flags up the divergence between the words of Höppe-the-scientist and Höppe-the-insurer:

Munich Re scientists (Hoeppe and E. Faust) publish in Science that attribution of losses to greenhouse gas emissions is not presently possible, and a Munich Re board member says that such attribution is ‘very probably’ leading to more extreme events,” notes Pielke.

It’s certainly hard to see how an insurance company can have had more success than ‘the world’s 2500 top climate scientists’ at isolating the effect of climate change on the occurrence of severe weather events. But then again, perhaps we can look forward to the IPCC citing Munich Re on matters of climate-change-induced weather patterns in its own reports in the future. And in a world where top scientists are wont to defer to economists on scientific matters of climate change, that is not such an unlikely possibility.

The economist in question is Professor Lord Sir Nicholas Stern, author of the Stern Report.

Stern has rather a close working relationship with Munich Re. Understandably, Munich Re is rather proud of the fact that its dirty insurance money funds such a high profile environmentalist.

Professor Lord Sir Nick has nothing to be embarrassed about, because nobody – least of all the BBC – seems at all bothered by any such conflict of interests. They are all too busy worrying about who Exxon is funding. Those who shriek the loudest about climate change – whether it’s insurance companies, Stern, the Royal Society, Lord Adair Turner or the Tickell dynasty – often have the most to gain from alarmism.

The insurance premiums we pay are largely based on the historical record – but they also include some measure of the risk of the risk of damage tomorrow. This needs to be rational calculation: if the risk of catastrophic climate change is exaggerated, then we are paying too much.

It seems that the greens have been right all along: an economic tail really does wag the scientific dog.

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