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Insuring against climate change

Susan Watts | 15:00 UK time, Sunday, 29 November 2009

As the cost of the clean-up in Cumbria rises to over £100m ($165m), after this month's record rainfall, the world's biggest insurer has told me that his industry should be spending 10 times more than that each year to help avert the worst effects of climate change.

Man in New OrleansThe cost of insuring against the effects of climate change - and of not insuring - is preying on the minds of the big insurance companies. Scientists are always reluctant to attribute single catastrophic weather events, like a storm or heavy rain or drought, to global warming. Most climate scientists, though, do expect climate change to increase the frequency of costly, extreme weather. And for insurers, making sense of the pattern of events like this is their business.

For Newsnight, I went to Munich to ask the head of the largest insurance group in the world, Munich Re, how he sees that pattern changing. Nikolaus von Bomhard, chief executive officer, agreed that Hurricane Katrina, and the tens of billions of dollars paid out by his industry, was a wake-up call for everyone, not just for politicians.

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Just a few per cent of the insurance industry's financial resources could set the world on a low-carbon path, he said.

I asked him how much of Munich Re's money under management he's now investing in green technology projects that could help avert the worst effects of climate change, and lower insurance costs. "I would dare to say that something from the 1-to-2% point range is possible, and that in our case is already something like $2 billion."

Doesn't sound very much, considering the work that needs to be done? Well that's what I thought - and here's how von Bomhard answered that. "It is not a free philanthropic exercise that we do here. So it must make sense also for our policy and shareholders. But don't forget that if the entire insurance industry did that, they have investments under management of several trillions... then a lot of money is coming into that pool - a lot of money..."

One or two percent of several trillion dollars? That's tens of billions... every year.

Matt Huddleston, Principal Climate Change Consultant at the Met Office, is working with insurers, bringing together weather and climate research to help equip the industry as it faces an exponential rise in the cost of payouts.

Hurricane Katrina satellite image"They're terrified that they might have a year where they have a lot of damage from winter windstorms in Europe, a lot of land-falling hurricanes in America and hail damage in the Midwest - all in the same year," he told me.

"And the question is, can we understand those risks that can be predicted in the future, and what does that mean for the industry if those things are connected and not independent?"

Von Bomhard put it another way: "If we do not do something now to contain the development of these risks they will - we will - end up with an uninsurable event because the capacity will not suffice to insure any more. So it's not about protecting our business rather to develop jointly with all those constituencies and make sure it stays within let's say quantities that can be insured."

At the company headquarters, we caught a glimpse of Munich Re's determination to understand the changes the world, and it, might face. On one floor, the company employs a mini academic department of weather and climate experts, who first spotted an increase in frequency of catastrophic weather events in the 1970s, long before climate change became a household phrase.

And there's another surprise beneath the HQ itself - built just before the First World War, and with the feel of an imposing stately home. It's linked to buildings around it by a network of tunnels, brightly-lit in psychedelic colours. The men and women in formal dark business suits strike a contrast as they nip through the strange, mind-bending corridors.

Cockermouth streetAnd the sums of money it and the rest of the insurance and re-insurance industry commands are mind-bending too, according to Nick Mabey, of environmental think tank E3G. "They have huge amounts of money under management. We need huge investment into the low carbon sector, over a trillion a year to 2030 in low carbon." He told Newsnight that the time for these companies to act is now.

"If we started to see the insurance companies coming forward and saying to governments, 'We want to buy your green bonds, we want to invest in your green funds overseas', that would be very powerful and that would help government convince other parts of the private sector that their was money available in liquid in this area..."

This weekend Gordon Brown called for a start-up fund of $10bn (£6bn) a year to help the developing world to adapt to climate change and move to low-carbon economic growth. Compare that with the clout of the insurance and pensions world. At last look, even after the financial crisis, together they command some $60-odd trillions...

You can watch my report on Newsnight, at 10.30pm on BBC2.


  • Comment number 1.

    gordon has blocked every bill to bring in a feed in tarriff which makes the uk near the bottom of the list.

    apparently we musn't use factory roof space and industrial units to make energy as the europeans do we must have offshore [the most expensive option possible] or onshore windfarms the nimbys get wound up about.

    apparently anyone who can shouldn't generate their own energy the surplus of which they could sell back to the grid but be dependent upon foreign multinationals and the centralised one way grid.

    apparently we shouldn't encourage investment in green tech but we should have carbon trading that 'gives the appearance something is being done' while transferring wealth from poor to rich those who can spend it on their private jets.

    apparently we shouldn't invest in green energy but in nuclear that already they are asking for higher bills to pay for it when they said it would be entirely funded by the 'private sector'.

    that is gordon's legacy.

    as for insurers. they are bookies betting on statistical outcomes. if they cannot have a statistical outcome they won't insure. they are not charities.

    however green bonds is a good idea. but then nuclear would suffer and we can't have that. their dtt departments would go into overdrive to crush any sensible idea s green bonds?


    susan- did you know about the emails? :)

  • Comment number 2.


    An invitation to Susan Watts: Engage with Jaunty and myself, and tell us why you do not seem to be 'investigative' regarding radical science. Do you simply have an acceptance of authority, or a wariness of the boss, or have you just not lived long enough to realise there is a lot of valid stuff outside 'the box'?

    PS While you were flying to Munich, did you ponder the unknowns of emissions-at-ALTITUDE? Our government of 'All The Milibands' (ATM) says the planet can tolerate corner-to-corner flight paths, if we just go nuclear at Air-Zero (down here). but I VERY STRONGLY DOUBT it is so. Did you give it a thought? Will you be asking searching questions??

  • Comment number 3.


    He also called for his pipe and his drum, but made no mention of fiddlers-three, as Wee Jimmie is worth three ordinary fiddlers any day. (Not to mention that he has called for just about everything, but the sinking kitchen, recently.)

  • Comment number 4.

    maybe dan brown should write a book 'The Climate Code' about how anyone who investigates the code fraud is persecuted and ridiculed by an inner illuminati yada yada


    apparently if the emails were provided by a whistleblower then they could be discussed. if they were hacked they were, under uk law illegal, which may give a 'get out clause' for the bbc climate illuminati :)

    a telegraph reports has this view

    ...commentators in the United States, in online video reports, are reading increasing chunks of the CRU computer code and bursting into laughter at the incredible manipulations they reveal as, hour by hour, the Climategate scandal unravels.....

    whoever released the emails deserves a medal. probably they will be outed and hounded?

    all this data is the basis for kyoto [and thus the carbon trading]

  • Comment number 5.

    apparently Dr Timothy F. Ball has been fighting this stuff for 30 years.

    his past statements include

    ..."Believe it or not, Global Warming is not due to human contribution of Carbon Dioxide (CO2). This in fact is the greatest deception in the history of science. We are wasting time, energy and trillions of dollars while creating unnecessary fear and consternation over an issue with no scientific justification.".....

    ...The majority of the scientists who are on the Kyoto and global warming bandwagon know nothing about the science....

    he was hounded and called a 'climate change denier'.

  • Comment number 6.


    It's all coming.

  • Comment number 7.

    back in may 2009

    Ex-BBC science man slams corp: 'Evangelical, shallow and sparse'

    "Reporting the consensus about climate not synonymous with good science reporting. The BBC is at an important point. It has been narrow minded about climate change for many years and they have become at the very least a cliché and at worst lampooned as being predictable and biased by a public that doesn't believe them anymore," he writes.

  • Comment number 8.


    I have pointed out before that the top echelons of State governments, get to swan the world, and play Globopoly with their home country as the 'piece' they move round the board. Currently they are playing a variation of the game (not unlike the variations in 'Mornington Crescent') called 'CO2'. There is no ultimate validity - it is JUST A GAME. 'All that is required, for a game to be played, is that complicit men agree a set of rules'. Each country, and each individual player, will have its own hidden agenda - NONE IS PLAYING FOR A PLANETARY WIN.

  • Comment number 9.

    maurice strong is someone we should know more about.

    as the climate fundamentist behind much of this climate change 'holocaust' [people are called deniers right? :)] and making money out of carbon trading that is based upon this 'science'.

    ever wondered why climate change had the attributes of a religion? because maurice is part of this

    ...Hanne and Maurice Strong acquired the big track of land knows as the Baca Ranch in 1978. Guided by the vision of Native American elders that his land had a great purpose, and her own desire to establish a sustainable, interfaith retreat community in North America, Hanne began to implement a new kind of development....

    some searches along these lines provide some frightening insights into the ideals behind this 'new world order'?

  • Comment number 10.


    Can no one write properly anymore? The comments posted by the first eight people that I have read, whilst at odds with my own beliefs, would add to to the discussion a little more if they were both intelligible and grammatically correct, two simple challenges none of them managed, simultaneously.

    That notwithstanding, nuclear is the only way to go with our current knowledge base - it provides cheap and clean power. Energy in - hot air and water out. Any rubbish spoken about, well rubbish - in the form of toxic waste will be disposed of by methods currently understood, (for example a secure hole deep in the ground) or those not yet imagined, methods invented and imagined for the needs of a burgeoning nuclear power industry. This will in turn cause de-commissioning costs to plummet as new technologies evolve or current ones become still more cost effective.

    The comments above remind me of the debate I had with fellow students before I learnt about nuclear power. It was when I was in Year 8, some seventeen years ago. It was a bizarre mix of conspiracy theories and ignorance. Fortunately we didn't have access to an online news source to vent our stupidity.

    But anyway it doesn't matter as dark matter from the LHC is going to cause a mini expanding black hole to come and suck us all up and end the world.

    Also, General Motors perfected a mini nuclear fusion engine twenty years ago based on technology learnt at Roswell but burnt the plans to protect big oil interests.

    And it's all a conspiracy of which I'm part of.

    And so are you.

  • Comment number 11.

    Sorry all...but I'm back in the climate change camp again!

    Obese air passenger in economy seat has picture taken

  • Comment number 12.


    Then I saw your post - now I'm a believer!

  • Comment number 13.


    you know you are on the right track when new posters turn up and wade in straight away with personal attacks and mud slinging.

  • Comment number 14.

    NEW? (#13)

    Or resurrected?

  • Comment number 15.


    Can no one write properly anymore? The comments posted by the first eight people that I have read, whilst at odds with my own beliefs, would add to to the discussion a little more if they were both intelligible and grammatically correct, two simple challenges none of them managed, simultaneously."

    What is 'puh-lese'? What a fantastically ridiculous person you must be!


  • Comment number 16.


    And I am quite happy for it to be me. However, is it not accepted that climate is chaotic? Is it not accepted, of chaotic systems, that to reinstate a previous set of values, WILL NOT YIELD THE PREVIOUS SITUATION? More to the point: there is, by inference, no predictable scale of temperature against CO2 concentration?

    I am - for once - completely serious. Either Herr Bomhard (related to Bigus Dickus by any chance - oh god, there I go) has a bunch of very poor scientific advisers, or chaos is not what I thought.

  • Comment number 17.

    crikey the more one looks into maurice strong the more the mind boggles

    things like the Earth Charter,['The real goal of the Earth Charter, is that it will in fact become like the ten commandments'], the aquarian conspiracy , all the main names behind carbon trading turn up etc

    the main trouble being the number of crypto republican websites that turn up in the searches which makes it a bit tedious looking for more objective sources or verifying their statements.

    there would be a good public service in verifying all the facts and links between those promoting climate change carbon trading and new ageism.

  • Comment number 18.

    Sorry but if you were referring to me as making personal attacks and mudslinging I would of thought it was obvious that, I;

    a) Generalised rather than personalised, with my accusation that the first eight posters suffered from a paucity of correct grammar and spelling. Some might have been okay. (Also there were not in fact eight posters at that point, merely eight posts, to be pedantic)

    b) I certainly wasn't mudslinging as I was suggesting that nuclear was the greenest power source possible, just because it's green it doesn't have to be muddy. Modern hockey is a good example of this.

    However, to address two further points and to clarify my position on global warming or not. The earth has warmed over the last twenty years. It might well continue to warm for a hundred years or it might not - the sample size is tiny compared to the scale of the Earth's lifetime.

    The first point is this; The temperature of the earth has varied significantly over the thousands of thousands of millions of years it has existed. The human brain cannot comprehend this scale of time. Maybe we've(re) making it warmer, maybe not. Whether we did or didn't contribute to the Earth's current climate changes - it was always going to change, be it hotter or colder. And so, like thousands of species over the course of history we will change and adapt or we won't. If we don't then as a species we will become extinct. I'm ambivalent. It is our own species's self-importance (and I suppose development) that even allows us to have these discussions.

    The second point is this - that bloke on the 'plane, from the linked story, eats too much, and suggests rather than adapting, we are as a species experiencing a regression. Again, this may be a short term, overly focused and generalised assessment. But we may be the first species ever to reverse natural selection.

  • Comment number 19.

    Ah! Sorry stevemallard,

    I forgot the 'a'!

    Puh-lease! is how my post should have read.

    I believe it is, although slightly theatrical, a perfectly common method of suggesting exaggerated disagreement with an argument. Whilst you may associate it with more 'Valley Girl' films such as 'Clueless', (Alicia Silverstone, 1995.) I believe my own first recollection of it is from 'A Streetcar Named Desire', (Tennessee Williams, 1947)

    And thank - you I do like to think of myself as a bit of a fox.

  • Comment number 20.

    the trouble is this climate religion has financial consequences. every person who pays an energy bill is funding the carbon trading market which just so happens to be run by those same people promoting this climate change religion.

    it is a huge wealth transfer from poor to rich the promises to make those who own exchanges [and so get a cut of every trade] fantastically wealthy.

    their idea is make everyone on the planet pay into this scheme via their bills. ie 4 billion people a year every quarter.

    this carbon trading gold mine depends upon the ignorance of the population paying into it and into their not examining the philosophic and evidential basis that underpins the carbon market.

    it is the closest anyone has got to taxing air.

    the big news is the evidence that was the basis for monetising carbon into an exchange is this model revealed in these emails. that is why this is massive news.

  • Comment number 21.

    Thank you jaunty, I think that is a wonderfully clear and concise description of why to be wary of Al Gore and his ilk that is woefully unpublicised.

    However, I think we take energy for granted and expect it to be dirt cheap. For example, I've been living in South Africa for the last four years and I'm now back in Europe. There have been many stories about S.A. energy in recent years and how prices are set to rise by 70% in two years. However, energy costs currently for a four bedroom house with A/C and pool are something like £30 a month for a house with no insulation whatsoever. Cheap, no? Whilst in our current times energy may seem as necessary as air there is no case for it to be effectively free.

    Sorry to use SA as an example again - but a diesel engined car costs up to 20% more because as they tell you at the showroom "you'll save at the pump." That's why, much like the U.S. 4l plus petrol driven mega pickups and SUVS dominate the roads.

    The swapping at government level of carbon credits seems so far removed to me of actuality I just don't care.

    It's like complaining people make money out of oil or gold or diamonds. Well they do! And you might or might have done or your children might!

    Necessarily, if you're of a capitalist bent, (like me!) people need to make money out of the necessities of life.

  • Comment number 22.

    I cannot wait for Yellowstone to blow its top then we realy will have climate change without a doubt and no human hot air will change a thing nature at its rawest cracking the whip. I suppose the eco brigade and our pathetic politicians could sit try on the parks lid, the ultimate sacrifice

  • Comment number 23.

    @dth stop rambling. no one cares for the arguments of a person who's so pedantic enough to critisice others' grammar. If you hadn't noticed we live in world of inequailty and we can't all be lucky enough to have the means to a good education. You're highly dislikable.

  • Comment number 24.

    A Politician Comes of Age?

    i've never like Lawson but he seems one of the few to take on and highlight the errors of carbon trading and the 'science' that excuses it before most.

    this from 2008

  • Comment number 25.

    So @stevemallard, you're saying only people who you feel you like should be posting and be listened to? Thats the trouble you see, no real debate, just two opposing sides banging their drums.

    I have only this thread to go on as far as the 'conspiracy' about who is in charge of carbon trading but surely WHATEVER large scale investment/developement programme that gets started in this World (be it about climate change or not) will, by the simple fact that these are the biggest money holding investors/companies in the World, be linked to them?

    It doesn't automatically make them evil overlords (although I'm not ruling it out of course!). You could easily point to the insurance companies which the article alluded to and see all your 'conspiracy' World-rulers with their fingers in all those pies too. Is insurance just a way of feeding the rich the poors' money? After all it's been made law to have insurance for houses, cars, holidays, mortgages. No?

    Climate change may well be because of mans activities but it may well be not. I've been saying this next bit for years and have recently heard others use this tack too...

    even if climate change isn't caused by man, we HAVE to find alternate power sources as the carbon WILL run out.

    We HAVE to stop deforrestation as we do actually NEED trees. And they are WAY nicer to look at than the vast swathes of stumps left behind (but only people in poor countries can see those sights so it doesn't matter to us does it.)

    Cleaner air with less particals knocking about IS preferable and healthier than continuing to pollute no?

    It would be preferable to have the oceans CLEAN rather than acting as a plastics holding facility no matter HOW big they are.

    Add most other ideals and outcome from trying to lower man made carbon emmisions and I like the outcome in itself whtatever the motivation behind it.

    I think these moves to invest in and promote clean ideology is great even if there is no man made cause of CC. I want the cleaner nicer World whatever.

  • Comment number 26.

    Considering the scale and complexity of what is possibly/probably to be confronted, I too was a tad intrigued by this:

    investing in green technology projects that could help avert the worst effects of climate change

    Which of those listed are they investing in... specifically?

    I just ask as I have an ongoing interest in details, especially when it comes to 'averting climate change', as where the money comes from, goes to and is meant to achieve seems pertinent.

    Investing can suggest multiple things, of course. So there could be investing in loss-making projects that do ease GHG reductions that could serve to ease (A)GW impacts.

    Or there's investing in some lobby-fuelled, over-subsidised, box-ticking, target-meeting piece of 'green' BS that actually serves my kids' improved futures not a jot. But might score a load of dough down the line for the 'investors'.

    There's a difference. Which is why I look at the enviROI. And remain less than thrilled at the utterances of many pols and supportive media press release reprinters when all I still tend to get is 'Act! or else...' without much clarity of what lies behind that call.

    A message still poorly drafted by its authors, and even less well conveyed, thus far, by messengers seemingly frustrated not so much by their inability to share it, but by the audience's inability to either understand or take willingness to take what they put out on board.

    If you are stuck in broadcast only mode there's no certainty that you are being received. And turning it up to 11 won't make it any more likely to sound better.

    It's all in the numbers.

  • Comment number 27.


    Where are the levers of 'Chaos Control' to be found? The near end of the Rainbow?


  • Comment number 28.

    ..WHATEVER large scale investment/developement programme that gets started in this World (be it about climate change or not) will, by the simple fact that these are the biggest money holding investors/companies in the World, be linked to them?..

    carbon trading could have been a not for profit venture linked to tech research.

    but no. all the main architects of 'man is responsible' are linked to making money out of it. i don't care what they believe but i do care that they are making me give them money for it.

    given they are profiting from it what they say is not different to advertising.

    and what benefit is carbon trading to claimate change? none.

    its just a means to enrich a few clever people who are engaged in mass hypnosis.
    as if that never happened before.

    is it really an accident that maurice strong, rockefeller, rothschild are all involved in both man as climate changer promotion and carbon trading on their exchanges as 'the solution'?

  • Comment number 29.

    I have given up on the climate...we are all one cares and we will deserve all we get and another thing, what happened to our grammar, absolutely diabolical, Tennyson, Kipling and Will Shakespear will be turning their graves...a little more care please...not purlese

  • Comment number 30.

    ...its just a means to enrich a few clever people who are engaged in mass hypnosis.
    as if that never happened before...

    Have you concidered that they are cruelly taking advantage of a real situation rather than that they are orchestrating a Worldwide lie involving tens of thousands of people?

    One of the things I find amusing about the 'email scandal' of late is that, IF this is a whistle blower rather than hacker then, out of the many many thousands of researchers, scientists and bodies Worldwide who must be involved in propagating this 'lie', who all must at least be suspicious if not complicit about the stats not adding up as they are presented, then only one person has felt it necessary to purse their lips and rattle the pea.

    I'm reminded of Hanlons razor which eliquently states...

    "Never attribute to malice that which can be adequately explained by stupidity."

    Man has been very stupid and continues so. These scientists MAY be wrong but if they are it won't be because there is some vast conspiracy. Too many would have to be too corrupt and many would not have the stomach for it.

    That the greatest self serving organisation in the World (the Republican Party in the US) is arguing against CC must show that it is true.

    The real money lies in covering CC up and allowing the companies who control the remainder of the carbon (30 years of oil, 50 years of coal, 50 years of gas?) to sell it at increasingly high prices as countries turn against each other (thus needing weapory suplied by the same countries and companies) instead of working together to solve this really quite easily.

    If the Insurance companies can chuck in tens of billions and it only be a couple of percent of their yearly turnover shows the money could eaily be found for SEVERAL Manhatten style projects, it's just the will isn't there becase the rightwing media malitia is at it's old tricks again.

    Cigarette companies did EXACTLY the same thing against the scientists who said for 50 years that they were killing people. These cigarette companies now admit their products kill and leaked memo's from 30 years ago show that they knew then.

    It's EXACTLY the game plan by some of the same people and companies.

  • Comment number 31.


    "instead of working together to solve this really quite easily."

    Are you sure Ian? Aren't the blokes of my title ACTUALLY COMPETING, regardless of surface friendship? Don't blokes (and Harperson-blokes) who run the world, COMPETE BY DEFAULT?
    Is not the ultimate competition all-out war; war THAT INVOKES MALE CAMERADERIE, at its finest? Hurrah!

    Until we can mature the cerebral bloke to out-smart the animal bloke, we shall eternally default.



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