Munich Reinsurance Group in Australasia Managing extreme weather

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Munich Reinsurance Group in Australasia Managing extreme weather risks: How do we know what

Munich Reinsurance Group in Australasia Managing extreme weather risks: How do we know what to expect in Asia Pacific? Heinrich Eder

Temperature anomaly (◦C) relative to the 1961 -1990 average (14◦C) Global mean air temperature

Temperature anomaly (◦C) relative to the 1961 -1990 average (14◦C) Global mean air temperature - observations 2007 is 8 th warmest year on record. The last 13 y (1995 -2006) represent the warmest on record, exception 1996. 2007 anomaly: +0. 40°C, above the 1961 -1990 annual mean. Green Cross, Brisbane, 30 August 2008 Source: CRU, UK (2007) 2

Urgency! Green Cross, Brisbane, 30 August 2008 3

Urgency! Green Cross, Brisbane, 30 August 2008 3

Australian climate change, observations §Warming of 0. 9 o. C since 1910, mostly since

Australian climate change, observations §Warming of 0. 9 o. C since 1910, mostly since 1950 due to increases in greenhouse gases § 2005 was Australia’s warmest year on record § 2007 was the warmest year on record for SA, NSW and Vic §More heatwaves and fewer frosts §More rain in the west since 1950, but less in south and east §Victoria - drying in autumn Green Cross, Brisbane, 30 August 2008 Source: Bo. M/CSIRO 4

Number of significant natural catastrophes, global Green Cross, Brisbane, 30 August 2008 5

Number of significant natural catastrophes, global Green Cross, Brisbane, 30 August 2008 5

Economic losses vs Insured losses since 1950’s, global Green Cross, Brisbane, 30 August 2008

Economic losses vs Insured losses since 1950’s, global Green Cross, Brisbane, 30 August 2008 6

Night on earth Green Cross, Brisbane, 30 August 2008 7

Night on earth Green Cross, Brisbane, 30 August 2008 7

South East Queensland (SEQ) scenarios § SEQ: Brisbane, Gold and Gold Coast Sunshine Coast

South East Queensland (SEQ) scenarios § SEQ: Brisbane, Gold and Gold Coast Sunshine Coast § > 2. 7 m residents, 66% of states population § Strongest population growth in Qld (71% within the last 5 years!) § Australia’s highest exposed values concerning TC’s, hence highest accumulated losses. Green Cross, Brisbane, 30 August 2008 1966, population 40, 000 today > 508, 000 Source: Climate Change and Coastal Erosion, Prof. R. Tomlinson, ABS, Qld population update. 8

Population trends in metropolitan areas 2021 min 2051 max min max Sydney 14% 18%

Population trends in metropolitan areas 2021 min 2051 max min max Sydney 14% 18% 25% 49% Brisbane 26% 46% 56% 136% Darwin 17% 50% 40% 171% Australia 14% 24% 66% • Projections compared to June 2004 population • Fertility rate, mortality, internal and net overseas migration Source: ABS Green Cross, Brisbane, 30 August 2008 9

Climate change projections Mid range emission scenario for 2030 (relative to 1990) Sydney mean

Climate change projections Mid range emission scenario for 2030 (relative to 1990) Sydney mean warming of approx 0. 9◦C Reduction in rainfall over Australia Increase in the frequency of hot days (above 35◦C) Green Cross, Brisbane, 30 August 2008 Source: CSIRO/Bo. M 10

Strategic approach to climate change Three areas Asset management Risk measurement / underwriting New

Strategic approach to climate change Three areas Asset management Risk measurement / underwriting New markets / new products Integration of sustainability criteria into investment strategies Changed frequencies/ intensities of weather hazards in underwriting/ risk management Pathway to low-carbon, hazard-adaptive economies: new business opportunities Green Cross, Brisbane, 30 August 2008 11

Munich Reinsurance Group in Australasia Thank you

Munich Reinsurance Group in Australasia Thank you

Increasing cost of weather related disasters: Main Drivers § Rising population § Better standard

Increasing cost of weather related disasters: Main Drivers § Rising population § Better standard of living § Concentration of people and values in large urban areas 1950 30% of world‘s population in urban areas 2005 50% of world‘s population in urban areas 2030 60% of world‘s population in urban areas § Settlement and industrialisation of extremely exposed regions § Susceptibility of modern societies and technologies to natural hazards § Increasing insurance density § Climate Change, particularly future loss development Green Cross, Brisbane, 30 August 2008 13

Munich Re’s Kyoto Multi Risk Policy Insured: Institutions engaged in projects for generation of

Munich Re’s Kyoto Multi Risk Policy Insured: Institutions engaged in projects for generation of emissions credits Compensated: Shortfall of emissions’ reduction compared to plan Advantage: Bundle of traditionally separated insurance lines (physical damage, counterparty risk, country risk, …) Green Cross, Brisbane, 30 August 2008 14

Increasing business opportunities - ENERGY Covers for renewable energies / energy efficient technology •

Increasing business opportunities - ENERGY Covers for renewable energies / energy efficient technology • wind power: on-shore / off-shore • Solar thermal / photovoltaic power • coal gasification • biomass • geothermal power • wave power • low energy buildings, e. g. Green Building Council’s Green Star program Green Cross, Brisbane, 30 August 2008 15

Increasing business opportunities - ENERGY Australian energy consumption 2. 1% year growth in energy

Increasing business opportunities - ENERGY Australian energy consumption 2. 1% year growth in energy consumption until 2020 => new sources required More hot spells => air conditioners => higher peak energy demand in urban areas • Huge renewable energies’ potentials in Australia • Huge energy efficiency potential • General growth in businesses / economies operating in those areas, resulting in increased economic treaties Covers for low-carbon technologies/energies e. g. carbon capture and storage technologies Insurers: promote these technologies by insurance cover in the construction and performance phase Green Cross, Brisbane, 30 August 2008 16

South East Queensland (SEQ): Tropical Cyclone § Demographics: Population growth, Increased standard of living,

South East Queensland (SEQ): Tropical Cyclone § Demographics: Population growth, Increased standard of living, Increased value at risk, Perception of risk § Buildings / Infrastructure: Coastal development, Building construction, design & maintenance, Building Code of Australia, Critical Infrastructure planning § Climatology: Intensity and / or frequency, natural climate oscillations § Insurance: Non-insurance and Under-insurance, Historical losses, Risk Accumulations and Catastrophe models, Minimises business interruption Estimation of return periods extremely difficult High uncertainties (i. e. large range of losses) from models, exclude storm surge Green Cross, Brisbane, 30 August 2008 17