Climate change will not happen in a steady, predictable
fashion, but rather in an unpredictable manner, potentially costing
hundreds of billions of dollars in damages, according to Major
Tipping Points in the Earth’s Climate System and the Consequences
for the Insurance Sector.

Berlin - The world’s
diverse regions and ecosystems are close to reaching temperature
thresholds - or “tipping points” - that can unleash devastating
environmental, social and economic changes, according to a new
report by WWF and Allianz.



Often global warming is seen as a process similar to a steady flow
of water in our bathrooms and kitchens, where temperature goes up
gradually, controlled by a turn of the tap.



But the report ‘Major Tipping Points in the Earth’s Climate System
and Consequences for the Insurance Sector’ documents that changes
related to global warming are likely to be much more abrupt and
unpredictable - and they could create huge social and environmental
problems and cost the world hundreds of billions of dollars.



Without immediate climate action, sea level rise on the East Coast
of the USA, the shift to an arid climate in California,
disturbances of the Indian Summer Monsoon in India and Nepal or the
dieback of the Amazon rainforest due to increasing drought, are
likely to affect hundreds millions of people and cost hundreds of
billions of dollars.



The study explores impacts of these “tipping points,” including
their economic consequences and implications for the insurance
sector. It also shows how close the world is to reaching “tipping
points” in many regions of the world, or how close we are to
tipping the scales toward disaster.



“If we don’t take immediate action against
climate change, we are in grave danger of disruptive and
devastating changes,” said Kim Carstensen, the Head of WWF Global
Climate Initiative. “Reaching a tipping point means losing
something forever. This must be a strong argument for world leaders
to agree a strong and binding climate deal in Copenhagen in
December.



According to the report, carried out by the Tyndall Centre, the
impacts of passing “Tipping Points” on the livelihood of people and
economic assets have been underestimated so far. The report focuses
on regions and phenomena where such events might be expected to
cause significant impacts within the first half of the
century.



“As an insurer and investor, we must prepare our clients for these
scenarios as long as we still have leeway for action,” says Clemens
von Weichs, CEO of Allianz Reinsurance. “Setting premiums
risk-appropriately and sustainably is of vital interest to everyone
involved, because this is the only way to ensure that coverage
solutions will continue to exist.”



Allianz intends to address climate change by entering into dialogue
with its clients at an early date. This will allow it to point out
countermeasures in a timely way, and work together to develop
specific coverage concepts, whether for existing assets or for
future climate-compatible projects like alternative energy and
water supply concepts, dyke construction, or protection against
failed harvests.



Global temperatures have already risen by at least 0.7 degrees
Celsius. Global warming above 2-3 degrees in the second half of the
century is likely unless strong extremely radical and determined
efforts towards deep cuts in emissions are put in place before
2015.



The melting of the Greenland (GIS) and the West Antarctic Ice
Shield (WAIS) could lead to a Tipping Point scenario, possibly a
sea level rise of up to 0.5 meters by 2050. This is estimated to
increase the value of assets at threat in all 136 global port
mega-cities by around 25.000 billion USD.



On the North-eastern coast of the USA and due to a localized
anomaly, the sea level could rise up to 0.65 meters, increasing the
asset exposure from 1.350 to about 7.400 billion USD



The South Western Part of the USA, namely California, is likely to
be affected by droughts and levels of aridity similar to the Dust
Bowl in the 1930s. The annual damages caused by wildfires could be
tenfold compared to today’s costs and could reach up to 2.5 billion
USD per year by 2050 increasing to up to 14 billion by 2085.



70 percent of working population may be put
at risk by droughts in India. The future costs of droughts are
expected to rise to approx. 40 billion USD per decade until the
middle of the century.



In a tipping point scenario, dieback of the Amazon Rainforest could
reach 70% by the end of the century as a consequence of a
significant increase in the frequency of droughts in the Amazon
basin. The impacts include loss of biodiversity and massive carbon
release. Costs could reach up to 9.000 billion USD for a surface of
around 4 million square kilometers.



“The Tipping Points report shows how quickly we are approaching
dangerous and irreversible levels of global warming,” Carstensen
said. “Economic consequences of passing the climate tipping points
are absolutely overwhelming.”



“There is still a chance to avoid the worst and this report shows
how urgent it is to act immediately. A strong climate agreement in
Copenhagen in December is the best, if not the only chance to
prevent the worst impacts of devastating climate change.”

Today’s insurance industry has
learned lessons from its experiences after major losses caused by
hurricanes like Andrew (1992), Ivan (2004) and Katrina (2005).
Better models will help people understand the frequency and
strength of natural disasters. “But good models will not be enough
to protect the climate,” explains Michael Bruch, of Allianz Global
Corporate & Specialty, the Allianz Group’s industrial insurer.
“The human component is playing an ever-increasing role in reducing
the risk from natural disasters, in terms of both risk management
and combating the human causes of climate change.”