With increasingly severe floods, storms and wildfires set to make some places “uninhabitable”, and insurance cover too costly, there is now an urgent need for greater investment in making communities more resilient and in adapting to climate impacts, Chief Climate and Geo Scientist at global reinsurance giant Munich Re, Ernst Rauch, told The Straits Times.
In a recent interview with The Straits Times, Rauch said: “If we have these repetitive events in certain areas, there’s no logic there to rebuild again and again, with homes being burned down or flooded.”
He continued: “Even if we stop emitting any greenhouse gases today, which is not likely to happen, this development towards increasing temperatures and impacts will go on for decades. We have to realise that the action that is really necessary – immediately necessary – is the adaptation to the impacts. We should not forget about emission reductions, but adaptation is absolutely key and we need to start now, not in the future.”
Adaption ranges from a variety of different things, it can involve designing cities and buildings to better cope with rising heat, to building water sea walls to tame rising seas, or to building water recycling systems to help cope with longer droughts.
However, certain areas are becoming far too risky for people to live in, especially places that are vulnerable to severe floods and wildfires, which are growing more frequent as the planet continues to heat up.
Rauch told The Straits Times that going forward, the insurance industry faces more risks from climate change, however Munich Re’s business continues to grow because of the rising appetite for insurance, but he added that there may be limits in certain places because the risks and insurance premiums will eventually become too high.
In addition, the recent severe flooding’s that occurred in Australia’s Queensland and New South Wales areas in February 2022, have cost the insurance and reinsurance industry over $2 billion.
These recent events have now reignited a debate between climate scientists, local governments, developers and insurers, on whether to ban rebuilding in high-risk floodplains, because severe flooding events are occurring far more frequently today.
The Straits Times reported that the head of the Australian governments National Resilience and Recovery Agency, Shane Stone has called for an end to floodplain development and said inundated homes “should not be rebuilt”.
In a recent interview with The Sydney Morning Herald, Stone said: “Australians need to have an honest conversation about where and how people build homes. The taxpayer and the ratepayer cannot continue to pick up the bill for these huge, catastrophic damage events.”
The flood-prone Hawkesbury-Nepean Valley on Sydney’s north-western fringe is one of the key focuses surrounding this current debate. Recently around 200,000 people had to be evacuated from the area because of floods, just one year after another severe flooding event took place in the same area.
Because of this, calls are now being led to stop further residential development in the valley.
Rauch explained to The Straits Times how we will now see more relocations of buildings after major disasters, and how this is one way to help improve resilience and reduce the vulnerability of communities.
However, there are growing concerns that the recent floods will push up insurance premiums in Australia, especially within the areas that are flood-prone, which will mean that many people will no longer be able to afford coverage, ultimately leaving them more vulnerable for any future disasters.
A solution for these concerns is public-private partnerships involving insurers, multilateral banks, the United Nations and philanthropies that help create and fund national and regional insurance pools that can pay out quickly after a natural disaster takes place.
Rauch explained to The Straits Times how these insurance pools usually cannot cover the entire cost for a natural disaster, they can provided quick cash pay-outs when governments most need money. Rauch also stated that the pools are useful, but they need to grow.
“Early warning systems are also lifesavers. “It’s not always only about money and rebuilding. It’s also about preventive measures,” he said.
Meanwhile, technology company – The Demex Group who focus on delivering climate-resilience through financial risks on a global scale, recently launched their new service, Climate Risk Appraisals, which provides a new management strategy for climate resilience.
In addition, Insurtech firm – Lemonade recently announced that they are now using blockchain to deliver affordable and instantaneous climate insurance.
