New report analyzes the evolving risk landscape under global warming
New York, NY (Sept. 3, 2013) – Guy Carpenter & Company, LLC, the leading global risk and
reinsurance specialist and member of Marsh & McLennan Companies, has released
an analysis of the evolving risk landscape spurred by global warming. Climate change, global
warming and the resulting landscape shift for risk management is a growing area of concern among
governments, the general public, the private sector and the (re)insurance industry at large.
According to the report, global warming is an established scientific fact that cannot be explained by
natural variability alone.
“The debate on climate change and global warming has been intensely polarized. A great deal of this
‘noise’ has clouded the very real and emerging issues that we as an industry and society need to
address,” said Johnny Chan, PhD, Director of the Guy Carpenter Asia-Pacific Climate Impact Centre.
“In order to adapt to climate change and the changing risk landscape, it is necessary to cut through
this noise and focus on objective decisions to mitigate both the financial and social risks associated
with climate change.”
The Global Warming Reality
According to the Intergovernmental Panel on Climate Change (IPCC), a scientific body that reviews
and assesses scientific evidence pertaining to the physics and impacts of climate change, the
evidence of global warming is undeniable and includes: increasing air temperatures, increasing
ocean water temperatures, tree ring characteristics, ice core characteristics and the retreat of ice
caps. Although climate variability has been cited over past centuries, with supporting evidence dating
back over the millennia, the rate of warming is believed to be unprecedented.
“Based on consistent and mounting scientific evidence, the IPCC has assessed that it is highly
unlikely that recent warming trends can be explained away by natural variability alone,” said James
Waller, PhD, Research Meteorologist for GC Analytics®. “Estimates show that the mean temperature
of the Earth could rise an additional two to four degrees Celsius by the end of the century. This may
seem like a relatively small increase, but the impact of rising temperatures, even by a few degrees,
could cause a shift in weather patterns, with considerable impacts worldwide.”
The Changing Hazard Landscape
The single greatest threat posed by global warming is the rise in sea levels, which are expected to
increase coastal flood frequency and severity from tropical cyclones, extratropical cyclones and
tsunami events. According to the IPCC, a sea-level rise of at least one to two feet can be expected
by the end of the century, though a wide range of sea-level rise scenarios exist. The growing urban
footprint and increasing population density in coastal areas has also amplified the financial and
societal impacts of such events.
The recent consequences of Cyclone Nilam for Eastern India and the impacts of Superstorm Sandy
for the coastal United States are poignant examples of the existing coastal flood threat. The impact
of hurricanes, notwithstanding any trends, is projected to become more severe under sea-level rise.
Changing weather patterns will also impose inland flood and drought risk for many areas, with
implications for agricultural, wildfire and water resources management. By the end of the century,
global climate models indicate that the number of days between precipitation events will increase for
areas including, but not limited to, Southern Australia, Southeast Asia and India, Southern Europe,
Central America and western North America, while others are expected to see diminished annual
precipitation and could face water shortages. Drought conditions in turn pose a hazard of wildfires.
Case in point, over the last three decades the wildfire season in the western United States has
increased by about 78 days.
Adaptation Measures
Adaptation measures to offset the impact and hazards posed by global warming include water
conservation and flood control efforts, coupled with sustainable agriculture and land-use planning.
Diligent adjustment and modification of codes and standards to improve resiliency to wind and flood
events can also offset vulnerability, in both developed and developing countries around the world, to
reduce the financial and social risks and impacts associated with these catastrophic events. This is
especially important for developing countries where over 95% of weather-related fatalities occur.
With the exception of coastal flood, inland flood and drought, the blanket assumption that increasing
financial losses are directly and completely caused by an increase in natural hazard frequency
misrepresents the issues. Rather, according to the report, it is crucial to account for factors including
(per capita) gross domestic product, total insured value, population density and annualized property
value. The impact of weather-related hazards are of course dependent on the frequency and severity
of events, but also on vulnerability, population density, local infrastructure and the property values of
affected areas.
For more information, visit gccapitalideas.com.
About Guy Carpenter
Guy Carpenter & Company, LLC is a global leader in providing risk and reinsurance intermediary services. With
over 50 offices worldwide, Guy Carpenter creates and executes reinsurance solutions and delivers capital
market solutions* for clients across the globe. The firm’s full breadth of services includes line-of-business
expertise in agriculture; aviation; casualty clash; construction and engineering; excess and umbrella; life,
accident and health; marine and energy; medical professional liability; political risk and trade credit;
professional liability; property; retrocessional reinsurance; surety; terrorism and workers compensation. GC
Fac® is Guy Carpenter’s dedicated global facultative reinsurance unit that provides placement strategies,
timely market access and centralized management of facultative reinsurance solutions. In addition, GC
Analytics®** utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance
decision-making process and help make the firm’s clients more successful. For more information, visit
www.guycarp.com.
Reactions magazine named Guy Carpenter Best Global Reinsurance Broking Company Overall and Best
Reinsurance Broking CEO of the year in 2012. At the Reactions London Market Awards, Guy Carpenter was
also named Reinsurance Broker of the Year and took home Reinsurance Broking Team of the Year honors
for both Property and Aviation. In the past year, Guy Carpenter has also won: Global Best ILS Advisor (GC
Securities*), US Best ILS Advisor (GC Securities*) and US Best Broker for Casualty Reinsurance from
Intelligent Insurer, Insurance Day‘s 2012 ILS Transaction of the Year (GC Securities*), and Reinsurance
Broker of the Year for the Asia-Pacific region at the 16th Annual Asia Insurance Industry Awards.
Guy Carpenter is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of
professional services companies offering clients advice and solutions in the areas of risk, strategy and human
capital. With 53,000 employees worldwide and annual revenue exceeding $11 billion, Marsh & McLennan
Companies is also the parent company of Marsh, a global leader in insurance broking and risk management;
Mercer, a global leader in talent, health, retirement, and investment consulting; and Oliver Wyman, a global
leader in management consulting.
*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US
registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000.
Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe)
Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of
Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates
owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any
security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark
Office.
