Can climate change be avoided?

According to a Swiss RE sigma study, claims for natural catastrophes and man-made disasters in 2013 came to $45 billion, which is significantly “down” from $81 billion in 2012.

In the FAnews April edition there was an article titled Rain, rain and more rain... in which local insurers were asked if it would be practical in the South African market if a bill lowering flood insurance premiums was enforced. While South Africa does not experience the violent storms that the US does, extreme weather events have had a significant impact on the local market in the past two years. Significant rainfall in South Africa has seen many home owners having to deal with the harsh realities of flooding.

Finding the fault

One of our readers, Steve Weiss, broker at Weiss & Associates, points out that “global warming applies, in theory, to the entire globe and not to just certain countries. If, in fact, CO2 levels determine global temperatures, as is claimed by the green lobbyists, then advocates have to explain why global temperatures have not increased for the past seventeen years.”

Weiss says that global warming alarmists must prove causality, not just correlation. They need to show a causal relationship between CO2 levels and global warming, and until now their weather models have failed to do so. If there are indeed more frequent and violent weather events, it is not due to higher levels of atmospheric CO2, but rather because weather has been influenced by natural causes.

Weiss points out that a major fall in claims at Swiss RE and Lloyds is unexplained if warming is increasingly affecting climate rather than just the weather. It is impossible to attribute specific weather events to global warming even if there were an alleged correlation between warming, CO2 levels and weather.

Counter to the study, claims data show that the frequency of severe weather events fell significantly last year so the premise of global warming alarmists is faulty. US and UK weather is completely different to the South African weather and claims. Therefore, what precautions can one take to lessen these claims, and how can planning to avoid losses be accomplished?

Taking a local perspective

Changes in climate could potentially render a zone that was previously not flood prone to become one that now is flood prone. Therefore, it is necessary to enforce tight controls around new developments.

Sean Jackson, Head of Auto & General Brokers, agrees with this, pointing out the danger to the industry if this process is not followed. “The fact of the matter is that if an underwriter does not receive the correct premium, the entire insurance pool is placed at risk,” says Jackson.

Because of the size and nature of the South African financial services industry, it is often seen as a trend setter on the African continent. South Africa could have a future role to play in designing market leading flood insurance products.

Designing such legislation can only be achieved after active engagement between government and the insurance industry. However, for this to work, Jackson says that government will need to play a very active role and subsidise premiums.

Adapting to change

As an industry our challenge will be to address the causes and the consequences of climate change. The prevailing message is that mankind needs to adapt in order to survive in this changing world.

Therefore the prevention, mitigation and adaptation to climate change demands coordination and commitment from all affected stakeholders.

Some of the views expressed in this article may not necessarily be that of the FAnews - ED