Posted on November, 23 2009

Berlin, 23rd November 2009 – The world’s diverse regions and ecosystems are close to reaching temperature thresholds – or “tipping points” – that can unleash devastating environmental, social and economic changes, according to a new report by WWF and Allianz.

Often global warming is seen as a process similar to a steady flow of water in our bathrooms and kitchens, where temperature goes up gradually, controlled by a turn of the tap.

But the report ‘Major Tipping Points in the Earth’s Climate System and Consequences for the Insurance Sector’ documents that changes related to global warming are likely to be much more abrupt and unpredictable – and they could create huge social and environmental problems and cost the world hundreds of billions of dollars.



Without immediate climate action, sea level rise on the East Coast of the USA, the shift to an arid climate in California, disturbances of the Indian Summer Monsoon in India and Nepal or the dieback of the Amazon rainforest due to increasing drought, are likely to affect hundreds millions of people and cost hundreds of billions of dollars.

The study explores impacts of these “tipping points,” including their economic consequences and implications for the insurance sector. It also shows how close the world is to reaching “tipping points” in many regions of the world, or how close we are to tipping the scales toward disaster.

“If we don’t take immediate action against climate change, we are in grave danger of disruptive and devastating changes,” said Kim Carstensen, the Head of WWF Global Climate Initiative. “Reaching a tipping point means losing something forever. This must be a strong argument for world leaders to agree a strong and binding climate deal in Copenhagen in December.

According to the report, carried out by the Tyndall Centre, the impacts of passing “Tipping Points” on the livelihood of people and economic assets have been underestimated so far. The report focuses on regions and phenomena where such events might be expected to cause significant impacts within the first half of the century.

“As an insurer and investor, we must prepare our clients for these scenarios as long as we still have leeway for action,” says Clemens von Weichs, CEO of Allianz Reinsurance. “Setting premiums risk-appropriately and sustainably is of vital interest to everyone involved, because this is the only way to ensure that coverage solutions will continue to exist.”

Allianz intends to address climate change by entering into dialogue with its clients at an early date. This will allow it to point out countermeasures in a timely way, and work together to develop specific coverage concepts, whether for existing assets or for future climate-compatible projects like alternative energy and water supply concepts, dyke construction, or protection against failed harvests.

Global temperatures have already risen by at least 0.7 degrees Celsius. Global warming above 2-3 degrees in the second half of the century is likely unless strong extremely radical and determined efforts towards deep cuts in emissions are put in place before 2015.

The melting of the Greenland (GIS) and the West Antarctic Ice Shield (WAIS) could lead to a Tipping Point scenario, possibly a sea level rise of up to 0.5 meters by 2050. This is estimated to increase the value of assets at threat in all 136 global port mega-cities by around 25.000 billion USD.

On the North-eastern coast of the USA and due to a localized anomaly, the sea level could rise up to 0.65 meters, increasing the asset exposure from 1.350 to about 7.400 billion USD

The South Western Part of the USA, namely California, is likely to be affected by droughts and levels of aridity similar to the Dust Bowl in the 1930s. The annual damages caused by wildfires could be tenfold compared to today’s costs and could reach up to 2.5 billion USD per year by 2050 increasing to up to 14 billion by 2085.

70 percent of working population may be put at risk by droughts in India. The future costs of droughts are expected to rise to approx. 40 billion USD per decade until the middle of the century.

In a tipping point scenario, dieback of the Amazon Rainforest could reach 70% by the end of the century as a consequence of a significant increase in the frequency of droughts in the Amazon basin. The impacts include loss of biodiversity and massive carbon release. Costs could reach up to 9.000 billion USD for a surface of around 4 million square kilometers.

“The Tipping Points report shows how quickly we are approaching dangerous and irreversible levels of global warming,” Carstensen said. “Economic consequences of passing the climate tipping points are absolutely overwhelming.”

“There is still a chance to avoid the worst and this report shows how urgent it is to act immediately. A strong climate agreement in Copenhagen in December is the best, if not the only chance to prevent the worst impacts of devastating climate change.”

Today’s insurance industry has learned lessons from its experiences after major losses caused by hurricanes like Andrew (1992), Ivan (2004) and Katrina (2005). Better models will help people understand the frequency and strength of natural disasters. “But good models will not be enough to protect the climate,” explains Michael Bruch, of Allianz Global Corporate & Specialty, the Allianz Group’s industrial insurer. “The human component is playing an ever-increasing role in reducing the risk from natural disasters, in terms of both risk management and combating the human causes of climate change.”