Confronting Climate Risks: Overcoming the ‘Tragedy of the Horizons’

6 March 2015


Reported by Sarah Connors, NERC-Funded CSaP Policy Intern (March 2015 - May 2015)

The second instalment of the Climate and Sustainability in Multiple Dimensions seminar series saw Rowan Douglas talk on “Confronting Climate Risks: Overcoming the ‘Tragedy of the Horizons’”. Mr Douglas explained how models can be adapted from the insurance industry to tackle the devastating effects climate change can have on the environment and its inhabitants. Click on the image below to hear the recording of the event.

“80% of natural disaster risk for our sector is through climate related perils“

Mr Douglas started by summarising the history of the insurance industry’s incorporation of natural disaster cover in the 19th century after a series of devastating city fires across the US. An analysis of the occurrence of worldwide natural disasters over the last 30 years showed that the insurance industry has adapted to the increasing number of natural disasters without any overall loss of capital. This is done by adopting ‘catastrophe risk models’ based on engineering models, which incorporate the likelihood of high risk events over a 200 year timescale. This method allows for future disasters to be prepared for in a financially resilient way.

“It is a cultural change about how we are going to organise our economies and our societies around resilience as a platform for sustainable growth”

Mr Douglas argued that the incorporation of a wider spectrum of climate risk can drive adaptation and mitigation policies, ensuring more sustainable development in the years and decades ahead. Responses to these insurance models have been enthusiastic and supporting. The UN has stated that a ‘stress test’ “evaluates the maximum probable annual financial loss that a company, city, or region, could expect once in a hundred years and enables them to manage their risk in an more informed and effective way” - UN Climate Action Summit 24 Sept 2014.

Dr Andrew Coburn responded to Rowan Douglas’ talk by describing it as a “call to arms”. He emphasised the current situation as a potential ‘pause for hope’ as the world is seeing a shift away from traditional fuel sources and towards more sustainable development – highlighting Rockefellers’ recent pledge to disband from fossil fuels. The discussion was then opened up to the floor for questions.

The third instalment of this climate series focuses on the relationship between humanity and nature and its implications for sustainability. Professor Sir Partha Dasgupta and Lord Martin Rees will discuss the outcomes of a joint workshop of the Pontifical Academy of Sciences and the Pontifical Academy of Social Sciences. Please see here for more details and to register your attendance.

(Banner image from EightBitTony via Flickr)

Dr Andrew Coburn

Risk Management Solutions (RMS)

Rowan Douglas

Willis Research Network

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