Climate change poses increasing financial risks, as costs of extreme weather have doubled each decade since 1990. In the UK, weather damage claims have doubled over the past six years to over £6 billion. Climate change could increase weather risks by 2-4% annually. It may require two-thirds more capital for global markets, increasing costs. Annual costs of flooding in Europe could rise to €100-120 billion. Insurance helps manage risks by spreading costs to taxpayers, businesses, and individuals.

1. Financial Risks of
Climate Change
Dr Sebastian Catovsky
Policy Adviser, Natural Perils
Launch of Phase II of European
Climate Change Programme
24 October 2005

2. Role of Insurance in
Weather Protection
• Spreading risk
• Protection for occasional,
unexpected weather
• Risk needs to be managed
• Costs borne by society
• Insured
• Tax-payer
• Individual

3. Changing costs of
extreme weather
• Costs doubling each decade
• Since 1990, $16 bn each
year on average
• 2004 was costliest year on
record: $40 bn
• UK Floods: Boscastle,
Carlisle, North Yorkshire
• 2005 Scandinavia Storm

4. 0
500
1,000
1,500
2,000
2,500
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
£m
Domestic
Commercial
• Claims have doubled to over £6 bn
over the past six years, compared to
previous period
• Weather risks could increase at a
rate of 2 – 4 % each year
UK Weather Damage Claims

5. Climate change and
extreme storms

6. Implications for global
capital markets
Capital required could rise by two-thirds to
$200 bn, increasing costs of capital

7. European Flood Risk
Annual costs could rise to €100 – 120 bn

8. Managing climate risks:
1. Emissions

9. Managing climate risks:
2. Vulnerability

10. Source: Munich Re
Insurance as a
messenger of change