The IPCC is a respected body,  it does not carry out science, it reviews the work of others and publishes a summary.  Its summaries represent a global scientific consensus.  In order to manage the vast volume of papers they have to review the IPCC have to impose a cut off date. This means that the latest IPCC report is based on science that is now three years old.

In many respects this is not a big deal.  The science back then was already very clear; climate negotiators already know what they have to do.  To reduce the risk of the worst predictions political leaders must agree to rapid cuts in greenhouse gas emissions; starting in the developed world and quickly involving everyone.

But to ignore the science of the last three years would be unwise.  Sadly, as has so often been the case over the past 20 years the emerging science is “worse than they expected”. One reason for this in my view is that the IPCC consensus process leads to excessively cautious pronouncements – the scientists are so scared of making statements that turn out to be overly pessimistic that they will only opine when they are really sure of their work.  Whats wrong with that?  You might ask.  Well, I suggest it means that the IPCC reports are not a “best estimate” but are really an optimistic statement – and this is bourne out because each new report contains even worse predictions.

However, climate negotiators dont need to wait until the next IPCC report (2013) for the latest science.  A large group of world famous scientists have produced a new report “The Copenhagen Diagnosis” which contains their latest views on risk.

The news isn’t good.

Greenhouse gas emissions are now 40% higher than 1990, higher than all the scenarios considered to date. Greenland and West Antarctic Ice sheets are loosing ice at an accelerating rate (see our 360 report on this), the Arctic Sea Ice is dissapearing much more rapidly than thought.  Sea levels are rising much quicker than expected, upper limits are now set at 200cm by 2100 compared to 59cm as previously thought!  

Is there hope?

Yes.  We can change and accept lower energy allowances.  Groups are starting to imagine what the society of the future will look like; and to many in the frenzied work environment of the early 2100 century they are quite appealing.  The future doesnt have to be bleak;  we need leadership and vision to choose a future we want – rather than have one imposed which, trust me, we don’t. Our thanks as ever go to the tireless scientists who have worked to ensure the climate negotiators have the best science on which to make their deal.

The CCRIF is the Caribbean insurance pool which pays out when certain parametric earthquake or hurricane indices reach a threshold.  The pool provides fast liquidity to islands that can see multiples of their GDP wiped out in a single event.  The pool purchases reinsurance and the Lloyd’s market (via Hiscox) has been involved.

CCRIF explain that their intention is to help Caribbean islands increase their knowledge on natural catastrophes and climate change.  It is interesting to see this development in advance of the landmark Copenhagen meeting on Climate Change later this year which, it is hoped, will bring a major change in the politics of climate change.  Many stakeholders have submitted proposals to this meeting and at least two of these relate directly to insurance.

The proposals by AOSIS (Alliance of Small Island States) and the MCII (Munich Climate Change Initiative) both believe that insurers have a key role to play in helping the developing world adapt to climate change.  First they believe that countries must adapt and thereby attempt to offset the growing risk (for example by building flood defences, changing building methods, increasing risk management education); but they both admit that adaptation will not remove all risk and some of the residual risk can be pooled by insurers and reinsurers. 

The new CCRIF announcement is a good example of the education on risk (sometimes called “capacity building”) that adaptation will require.  They also state they will assist with disaster reduction schemes, which makes a lot of sense; by reducing the risk the pool will go further.

Deep and rapid cuts in greenhouse gasses are essential.  Yet there will be many years of unavoidable change (probably at least 100) and the global efforts to adapt will bring opportunities to those adept at managing risk.  Insurers have a lot to offer and need to be ready to act.

Not only is Willis Tower ‘iconic’ because it is the tallest building in the western hemisphere: it is important because it is being comprehensively ‘greened’ by its owners (pdf), at a cost of $350 million.

The building, which already meets Leadership in Energy and Environmental Design (LEED) criteria, is undertaking sustainability initiatives above and beyond those used by the United States Green Building Council to rate a green building.

The modernisation includes:

—Efficiency improvements to the building’s exterior envelope and 16,000 windows. Strategies to achieve a thermal break of the curtain wall are also being investigated;
—Mechanical systems upgrades in the form of new gas boilers that utilise fuel cell technologies, which generate electricity, heating and cooling at as much as 90% efficiency;
—The tower’s 104 high speed elevators and 15 escalators will be modernised with the latest technology to achieve 40% reduction in their energy consumption;
—Water savings that will be realised with conservation initiatives to reduce water usage by 40% and save 24 million gallons of water each year;
—Lighting that will be upgraded to save up to 40% of lighting energy consumption;
—Wind turbines to take advantage of the tower’s height and unique set-back roof areas; Solar hot-water panels will help heat water for the building; 
—Green roofs that can sustain high-altitude conditions, and that will be among the tallest in the world, will be tested to reduce storm water runoff, improve insulation, help mitigate the urban heat island effect, and provide pleasant vistas for tenants overlooking the areas.

Willis Tower is leading the way at an important time. There is a growing body of opinion that we’re not doing enough to mitigate carbon emissions. Only this week, an international group of respected academics called on world leaders to abandon their current policies on climate change and concentrate instead on improving energy efficiency and decarbonising energy supply.

The authors of a report published by the London School of Economics’ (LSE) Mackinder Programme and the University of Oxford’s Institute for Science, Innovation & Society, How to Get Climate Policy Back on Course (pdf), say the strategy based on overall emissions cuts has failed and will continue to fail.

Certainly, there is no proof yet that the stumbling Kyoto Protocol will have any effect on reducing global emission. Whereas the direct action such as that taken at Willis Tower will at least show immediate tangible results.

Adaptation is the term used in climate-change circles to refer to actions taken to make infrastructure and processes more resistant and resilient to climate related harm.  Resistance means that whatever the hazard, it will be kept at bay for longer (eg a flood proof membrane to keep flood water out); and resilience means you bounce back quicker after an event (for example by putting kitchens and living spaces upstairs rather than downstairs for buildings in a flood plane).

Repetto’s report notes that many past studies have assumed that developed countries will adapt to climate change, and therefore for low temperature increases caused by climate change, the impacts will be contained. He goes on to show that assumptions don’t appear to match the way human beings and policymakers actually behave. He cites reasons for humans’ less than rational behaviour such as: the perverse incentives of state run insurance, where premium rates are less than the risk requires; or behavioural economics, which includes concepts like ‘anchoring’, where people struggle to move away from previously held beliefs.

He notes that many disaster plans are based on past events rather than forecasts from climate models and have repeatedly been shown to fail because of this.

His final chilling sentences read:

“Without national leadership and concerted efforts to remove these barriers and obstacles, adaptation to climate change is likely to continue to lag. It will be largely reactive rather than anticipatory and preventive, responding to damaging impacts once they have occurred. To say that the United States can adapt to climate change does not imply that the United States will adapt.”

Lloyd’s 360 project, working with Risk Management Solutions, produced a paper (pdf) in September last year on the benefits of adaptation. It showed that sea level rise of just 30cm could double average losses for some exposed properties; but that certain forms of adaptation could bring the risk back down to below current levels.

Repetto’s paper reminds us that even though adaptation can make sense it often happens too late, or not at all.

Repetto’s paper is on this website: www.climateactionproject.com

Scientists – as ever – are being innovative in their use of the available data.

Apparently they’ve taken satellite observations of sea surface temperature and also the amount of observed chlorophyll from plankton and noticed that they correlated with cholera outbreaks.  Rita Colwell from the University of Maryland has been leading this research.

In an interview on “the naked scientists” Professor Colwell  (”Predicting Cholera Outbreaks from Space” March 2008) noted that: “The areas that are affected mostly are the developing countries: India, Bangladesh, Malaysia, countries in the Middle East and Far East and countries where sanitation and safe drinking water are not available to all.” 

Meera Senthilingam, one of the naked scientists’ team noted that: “We’ve all heard about climate change in the news […] But one factor we don’t hear about is the effect climate change can have on human health and pandemics. A bacterial disease now thought to be exacerbated by climate change is cholera.”

As is so often the case we see the interconnectedness of emerging risks. Climate Change is a subject the Lloyd’s 360 project has devoted significant time to. Pandemics have been studied by the emerging risks team culminating in a report published in October.

I recently came across a great example of how adaptation can help.  The picture shows the results of Hurricane Ike’s storm surge.  It starkly illustrates that well adapted properties fared very well; the fate of their neighbours was sadly different.

According to the Institute of Business and Home Safety the homes left standing had all been designed according to the standards they promote. The standards clearly worked. The IBHS is a non-profit organisation whose mission is to “…reduce the social and economic effects of natural disasters….”. Their standards are called “Fortified …for safer living”^® and are a practical list of adaptations that can be made to improve the resilience of property to natural disasters.

They address their advice to both homeowners and also builders. This is good to see; I think it’s crucial that the building industry is engaged when discussing adaptation. If builders aren’t aware of adaptation options they won’t discuss them with their clients, and an opportunity will have been missed. The IBHS’s 77 page “builders’ guide” gives a detailed breakdown of suggested safety measures ranging from landscaping to roof design. They also consider all types of peril across the United States including hurricanes, wildfires and flooding, each of which may already have been adversely affected by climate change. 

Our latest 360 report looks at various adaptation measures, some of which are broadly in common with those the IBHS recommend.  Working with RMS, we have quantified the reduction in average losses that adaptation would be expected to bring. We found in all cases that an appropriate combination of adaptation measures can reduce future risk to below current levels. Such modifications are not free; but we hope that, by illustrating the financial benefit of adaptation, consideration of costs versus benefits can be made.

Some scientists are talking about far more extreme sea level rises than 30cm by the end of the century. Professor David Smith speaking in our latest video, which accompanies the 360 report, suggests that 2m of rise by 2100 is quite possible.  So 30cm of rise could happen sooner than you think. We believe it is plausible that it could happen as early as 2030, which is well within business timeframes. Of course the pace of change could be slower than this. However, this just illustrates the uncertainties that climate change brings and the need to plan flexibly.

In the event of really extreme sea level rise the only option in some regions will be to move; they will quite literally be underwater. The IBHS state that in some areas, such as low lying barrier islands, some structures cannot be certified. They have clearly concluded that some areas are just too hard to protect; we can expect that the number of homes in this category will rise in future. However, for less exposed areas, and shorter timeframes, it is possible to adapt to changing risk.

The first can be found at this link by Jim Hanson who heads NASA’s Goddard Institute for Space Studies in New York comments on the increasing risk of rapid ice sheet collapse leading to large increase in sea level. He makes the chilling comment “I find it almost inconceivable that “business as usual” climate change will not result in a rise in sea level measured in metres within a century. Am I the only scientist who thinks so?” (The link is mine, not his.)

We can answer that question. He is not the only scientist that thinks so. In our report on Rapid climate Change published on Lloyds.com earlier this year Dr Stephan Harrison (summarising the work of other scientists, including Hanson) notes that “Projections of the stability of the ice sheets suggests that large portions of them will melt during this century.” He goes on to warn that “Much of the West Antarctic ice sheet lies at, or below, sea level and hence has the potential to collapse rapidly.” Hanson also discusses this noting that “…the primary issue is whether global warming will reach a level such that ice sheets begin to disintegrate in a rapid, non-linear fashion on West Antarctica, Greenland or both. Once well under way, such a collapse might be impossible to stop, because there are multiple positive feedbacks. In that event, a sea level rise of several metres at least would be expected.”
“I’d bet …. that It provides a far better estimate of the ice sheet’s contribution to sea level rise than a linear response”

Hanson gives some comments on the possible pace of change. Suggesting that a 1 centimeter rise over the 2005-2015 decade followed by a rate doubling each decade thereafter would lead to a 5 meter rise in sea levels and virtual depletion of the Western Antartic Ice Sheet. A 5 meter rise would have enormous adverse consequences globally. Hanson is the first to admit that he doesn’t know whether a rate doubling every decade is correct; but he does make the point

It doesn’t appear that rapid major sea level rise will trouble insurers in the very near future, even according to Hanson; though our rapid climate change report does illustrate that changes can happen regionally over much shorter timeframes if ocean currents reorganise themselves. We do believe that insurance strategists should be considering the impact on markets in the longer term however. We also believe that regular, if small, increases to sea levels will chip away at profits, as storm surges are amplified, unless these trends (which may not be present in loss data until the next “big event”) are taken into account in capital and pricing models. Models like these should be forward looking and not just based on past experience.

The second paper of note this week is from Greg Holland and Peter Webster, published in the philosophical transactions of the Royal Society. Their paper “Heightened tropical cyclone activity in the North Atlantic: natural variability or climate trend?” suggests that “there appears to have been a substantial 100-year trend leading to related increases of over 0.78C in SST and over 100% in tropical cyclone and hurricane numbers.”

Holland and Webster have paid careful attention to the concerns of Chris Landsea regarding data quality but, despite these, still find a significant trend. They find three periods of stability with rapid transitions between these stable states; “This sharp transition from one climatic state to another is a feature of nonlinear time series”. Each stable state has 50% more cyclones than the previous state and they believe this is caused mainly by global warming.

Given other scientists’ concern about the completeness of the data they have given considerable attention to the robustness of their results. They find that the upward trend is very robust and also that the concerns of other scientists regarding the older data to be too pessimistic “Our conclusion is that the number of earlier missed storms most likely lies between 1 and 3 per year prior to 1900, less than 2 in the early [twentieth] century and dropping off to essentially zero by 1960. The conclusion by Landsea (2007) of much higher numbers of missing storms is considered to be based on a false premise of an assumed constancy of landfalling storms ratio”.

They are unclear about where the trend will end up suggesting that we are currently in the middle of a “transition phase”. They hypothesise that a further increase of 1-2 degrees centigrade in Sea Surface Temperature over the next 50 years could lead to an average of 20-25 cyclones per year, compared with the current level of around 15; they raise the question of whether there are factors that will act to constrain this growth. They note that these issues “[are] a matter of great scientific interest and a matter of considerable concern for coastal communities in the impacted regions.”

Their work adds to their previous work and that of other academics such as Kerry Emanuel and Jim Elsner. It is also in line with the work we presented in our Adapt or Bust report on climate change in 2006 which, based on the work of other scientists, showed a clear climate change signal in sea surface temperature matched with a similar trend in major hurricane activity.

Adapt or Bust report we stated “With more – and more accurate – scientific information now available, insurers are increasingly able to respond to the scientific predictions of each season ahead. This means a shift in emphasis when pricing catastrophe risk – away from basing price on a long-term baseline trend, which only very gradually allows for the impact of climate change”. We believe that Webster’s work gives further weight to this argument.