Munich Re has released its US white paper, Reimagining Resilience in a Post Pandemic World, which explores how society might become more resilient to disastrous situations similar to the COVID-19 crisis, such as climate change risk.
As COVID-19 is continuing to have a huge global disruption on societies and economies, global warming is taking a backseat in the uncertainty, the reinsurer warns.
Raghuveer Vinukollu, Nat Cat Strategic Products Team Lead, Munich Re US commented on the paper, explaining: “Climate change is one of the greatest long-term risks in the insurance industry, and the early impacts are already here—right now.
“As the COVID-19 pandemic has illustrated, the best course of action is preparation on an ex-ante basis rather than an ex-post one. Severe flooding, devastating wildfires and hurricanes… no place on earth is immune to extreme weather events.”
He continued: “There is strong evidence that climate change has already had a significant influence on the frequency and severity of some types of natural disasters and extreme weather events in regions across the world. Society needs to act immediately to mitigate and adapt to the effects of climate change if we want to strengthen our resilience.”
Munich Re’s paper notes that both pandemics and climate-driven catastrophes are systemic by nature, meaning that societies will need longer-term prevention strategies in order to protect vulnerable regions.
However, it will be up to the vulnerable regions to prioritise long-term strategies instead of opting in for short-term priorities, it added.
Effects of extreme weather may increase the already widened gap that exists between economic and insured losses. This is likely to happen if steps are not taken to reduce the vulnerability of property and adapt to the changing risk landscape.
Vinukollu continued: “Extreme weather events are not anomalies or black swans, but more like grey rhinos. Extreme events, such as a pandemic or a natural catastrophe, may seem like they are once-in-a-lifetime black swan events, but they are not. Urbanization, deforestation, resource consumption and mass travel have the potential to make these events more common, especially if our collective behaviour remains unchanged.”
In the paper, Vinukolli explains that it was countries that understood the risks associated with a global pandemic were the ones that were most prepared, ultimately suffering less disruption and were able to return to a form of normality quicker.
A greater acceptance of climate change therefore opens the door for governments, enterprises and others to build resilience, Munich Re suggests.
The work to promote resiliency in the face of climate change must be collective in nature, with the insurance industry having an important role to play. Better risk transfer solutions and a higher take-up rate of insurance across communities means a faster recovery.
The insurance industry is already advanced in its understanding of climate risk and extreme events. Its modelling, analysing and forecasting capabilities offer vital insights and could help towards managing risks, identifying weaknesses and creating a prevention plan.
