Swiss-Re: Caribbean Storm Damage Costs May Rise 50% With Global Warming

Caribbean Storm Damage Costs May Rise 50% With Global Warming

by Alex Morales and Jeremy van Loon, Bloomberg, August 19, 2010

Climate change may add 50% to the storm damage costs incurred by some Caribbean nations over the next two decades, said Swiss Reinsurance Co., the world’s second-largest re-insurer.

Wind, storm surges and inland flooding already cost some Caribbean nations up to 6% of their economic output each year, the Zurich-based company said today in a statement on its website. Global warming could add costs amounting to another 1-3% of output by 2030, it said.

Insurers are being hit with more claims as damages from natural catastrophes rise. Costs to clean up after storms and other natural disasters reached a record $180 billion in 2005, of which insurers covered about half, according to Munich Re, the biggest re-insurer.

“As a global re-insurer. we are already exposed to the effects of climate change,” said David Bresch, Swiss Re’s head of sustainability. “Projected climate patterns are likely to heighten the risks.”

More than 190 nations have been trying since 2007 to craft a treaty to rein in climate change and channel aid from rich to poor nations to help them adapt to its effects. At the latest round of talks earlier this month, island nations said that loopholes in the existing treaty, the Kyoto Protocol, could wipe out emissions reduction pledges for 2020.

Greenhouse gas emissions reductions pledged so far by nations would lead to total warming of 3.0-3.9 °C (5.4-7.0 °F), the Pew Center on Global Climate Change said. That’s more than the 2-degree maximum sought by the U.S. and European Union and the 1.5 degrees proposed by an alliance of 43 low-lying and island nations.

Atlantic Hurricanes

The strongest Atlantic hurricanes may almost double in frequency by the end of the century as the planet warms, according to a paper in the journal Science in January. Occurrence of the most destructive hurricanes may rise 81% over 80 years, the U.S. National Oceanic and Atmospheric Administration-led team wrote.

The 2010 Atlantic storm season may be the most active since 2005, the worst on record, Moody’s Investors Service said in June. The season began in June and ends in November.

Swiss Re said territories have a range of options open to them to reduce the risk of damage. The Cayman Islands could “cost-effectively avoid up to 90% of expected losses” by building sea walls and enforcing construction codes, the re-insurer said, citing the study. In Dominica, just 2% of the possible damage could be avoided cost-effectively using such measures, it said.

Swiss Re was an adviser on the study on the economics of climate change in the Caribbean, which was released by the Caribbean Catastrophe Risk Insurance Facility, a risk-pooling fund of which 16 Caribbean governments are members. The research, which began in February, covers Anguilla, Antigua and Barbuda, Barbados, Bermuda, the Cayman Islands, Dominica, Jamaica and St. Lucia, according to Swiss Re.

--Editors: Reed Landberg

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net; Jeremy van Loon in Berlin at jvanloon@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

Link:  http://www.businessweek.com/news/2010-08-19/caribbean-storm-damage-costs-may-rise-505-with-global-warming.html