Global warming or global warning?

The insurance markets have not really addressed the issue of global warming in any real way that will allow their insureds to sleep peacefully.

On 26 December 2004 the world woke up to news that a massive tidal wave had caused devastation to Thailand and its visitors, some from South Africa. For years I have been talking about the effects of a tsunami, without anyone understanding what a tsunami actually was. After Boxing Day 2004, we talk about tsunamis as often as the Japanese.

The insurance loss was not high, but when will the industry really take notice and reserve, not for if it happens, but for when it will happen?

El Niño and La Niña

The earth's temperature is rising by +-0,1% per year and causing all sorts of climatic changes. El Niño and La Niña are two weather conditions that rely on a moderate change in temperature. If the sea temperature is too cold, La Niña causes drought, and if too warm, El Niño causes rain. It seems, but has not been proven, that as El Niño flows westerly it brings heavy rain clouds towards Europe. La Niña travels easterly and tends to bring drought to Asia and heavy rains to Africa. Why do these two weather conditions interest us?

Well, by reducing the volume of trees in the rain forests in Central South America, the ground becomes hotter and with the trade winds, we experience La Niña. While we had the full rain forests, the European weather conditions were constant over many centuries. Man's hunger for South American trees is changing the earth's climatic conditions.

Industrialisation

I am not saying that the cutting down of the South American rain forest is the sole cause of the change in climate, but it does have a bearing on our use of fossil fuels. Oil, the world's problem child, serves man well, but we do not use this substance wisely. Shortly after the internal combustion engine was used to propel motor vehicles, the idea of an electric motor vehicle was squashed. Too much money could be made out of oil, so electric vehicles became a 'no-no'. Steam vehicles were also considered, but the dirt and smell did not appeal to the masses who liked the idea of 'clean machines with no smell'.

The industrial revolution was a marvelous period in man's development. Henry Ford used this to his advantage by creating the 'conveyor belt manufacturing system' which sped up the output without increasing the workforce. This mass production system increased prosperity, for a few.

If smoke and fumes prevent the sun's rays from reaching the ground in the strength needed for plants to grow properly, then 'Mother Nature' needs to compensate. How? By heating up and melting the ice caps to provide more water which in turn will evaporate into the atmosphere and fall as rain. So, more heat means more rain.

Strange manifestations

We have heard about the "Bermuda Triangle" and the recent loss of Flight 447 over the mid-Atlantic, as well as the recent loss near the Comoro Islands. Could these be related? The earth's latitude is similar in both cases, basically the Equator, and the weather conditions were opposite.

Turning against us

So what am I saying? With the effect of global warming, are we turning the weather conditions against us? Is Mother Nature saying the big bang is not coming, but watch it, folks! The evening out of the population and the changing weather conditions will continue until we change our ways. I believe that the earth has reached its absolute maximum capacity of humans at around 6 billion and should not expand. Mother Nature will therefore even things out via catastrophes or disease.

Swine Flu could be the disease, but I think it could be HIV AIDS or cancer. As for catastrophes, I believe we could see a large volcano eruption, a massive earthquake in the sea bed, possibly in the Atlantic, or such heavy rainfalls that our manmade structures could collapse due to subsidence or landslip of unstable ground.

Impact circles the globe – and reaches us

So what are we in the south of Africa worried about? We are safe, aren't we? Consider the 'Ring of Fire' and what is on the opposite side of the globe. Now imagine the globe as a balloon. When you push in one side of the balloon, the other side bulges out to balance the air content.

So what is likely to happen on the other side of the 'Ring of Fire'? Africa is the main land mass, with the Atlantic and Indian Oceans as the water mass on either side. What happens under the Atlantic or Indian Oceans is not broadcast, but the Serengeti has happened. The Ceres Earthquake of 1969 and 70 was not the first – it also happened in 1912, 1921, 1937 and 1960. So, is Nature getting ready to move again? Is the big one still to come?

Coastal areas are vulnerable

The Thailand tsunami rose the water level at Durban's coast by just half a metre, and for one or two waves only.

As is common around the world, people tend to live near the sea, since the climate is more temperate and the scenery is more pleasing. Only during a bad storm is the coastal area a bit scary. But even then, only for a day or two. Yes, it does rain heavily, but the local authorities have built this into their drainage system, so we have little to fear. Or do we?

Insurance issue

So does this convert into an insurance industry problem? Yes. In Europe you cannot purchase "surge" cover (flood insurance) for any assets within the flood region of the Danube or Rhine Rivers. In fact, you can't get this cover in Holland anywhere near the Dykes. I can see the UK and USA going the same way, and even insurances in Asia near rivers following suit.

So are we safe in South Africa, or can we expect the same to happen here? Fortunately the Vaal and Orange Rivers do not support much industry near their banks, but at our coastal regions we have a very large part of our finished product factories near rivers. So flood insurance could soon be either excluded or priced very high. Re-insurers just need to be hit with another Domoina (of 1984), or further storms in Port Elizabeth or Cape Town, and the game will be on.

Insurance industry response

So has the insurance industry addressed the issue of global warming? Actually yes, but not that we have noticed. All the reinsurers have issued articles on global warming and have requested their insurers to underwrite surge and coastal risks more critically. We are all aware of the CRESTA Zone requirements and the global risk limits arrived at following the hurricanes on the East Coast of the US.

I do not want to cause alarm, but another Domoina, or another earthquake in Ceres or flood in Port Elizabeth could result in the old Special Perils and Earthquake rates being imposed again.

Dire warnings

Is Mother Nature warning us or are we warning ourselves? Have we caused global warming or has Nature issued a global warning?

If you want to enjoy the Maldives, I suggest you plan a holiday for no later than 2012. Thereafter the islands are likely to start disappearing.And I will stay in Joburg. Yes, we have a lot of manmade dangers here, but it will take a mighty strong tsunami, an unknown volcano or a massive rock strata movement, to get me.