Extreme weather events

Enabling the transition to a lower carbon world

This is reflected in the increasing seriousness with which the media is treating announcements on the subject, with the 2005 Kyoto Protocol, 2015’s Paris Accord and 2021’s COP26 gathering in Glasgow, and the UK garnering increasingly more mainstream news coverage as time goes on. The Paris Accord garnered 55 signatories whose nations between them generate 55% of the world’s total greenhouse gas emissions (GHGs). That Accord committed to limiting global warming to under 2C, which had since been revised by COP26 to 1.5C. Climate change is now recognised as a collective, global challenge.

Climate change requires massive transformation across sectors, which will bring both risks and opportunities. All countries, sectors and businesses are setting their own transition pathways as business seek to unlock these opportunities and ensure the transition creates value, rather than destroys it.

The time to avoid a worst case scenario is now

Recent extreme weather events such as Hurricane Ian, European heatwaves, Australian droughts, and Winter Storm Uri are all driving home the increasingly unpredictable and violent potential of Earth’s changing weather systems.

While existing natural catastrophe modelling helps insurers anticipate the potential costs of extreme weather events, there is no denying the fact that climate change, alongside demographic and vulnerability changes, is making the outlook more complex and unpredictable than ever before. Economic losses from natural disasters are already increasing, so climate change is likely to amplify this trend.

Current projections are based on scenarios in which the Earth’s atmosphere meets or exceeds a certain temperature threshold by 2100. However, climate science is complex. Although we understand that the impact of climate change on perils will be region-dependent, exactly how said perils will evolve in a changing climate is relatively unknown.

As weather becomes more unpredictable, changes in the number and pattern of events could leave little time for respite in between. This is likely to lead to a drain on available capital that will prevent the affected regions recovering in time to weather the next storm.

If this cycle snowballs, global GDP growth could be severely curtailed over time. The impacts of climate mitigation and extreme weather risk prevention may only truly be felt decades from now, but the cost of inaction is likely to be too high to bear.