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Allianz ag - Risk Assessment of 2 Degree Increase in Global Temp

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December 20, 2009 – Comments (2)

It seems the financial risk of global warming will be paid, whether or not global warming continues.

If global warming does not occur or risks do not materialize, but premiums increase due to the risk, insurers should be excellent investments.I do not think that is a good bet. 

From the executive summary (the full report contains much more than just rising seal levels risks): 

The focus of climate change mitigation policy to date has been on "preventing dangerous anthropogenic interference with Earth's climate system". There is no global agreement or scientific consensus for delineating ‘dangerous’ from ‘acceptable’ climate change but limiting global average temperature rise to 2 °C above pre-industrial levels has emerged as a focus for international and national policymakers.

The origin and selection of this 2 °C policy threshold is not entirely clear but its determination has been largely informed by assessments of impacts at different levels of temperature increase such as those of the UNFCCC Assessment Report 4 (AR4). With few exceptions, such assessments tend to present a gradual and smooth increase in scale and severity of impacts with increasing temperature. The reality, however, is that climate change is unlikely to be a smooth transition into the future and that there are a number of thresholds along the way that are likely to result in significant step changes in the level of impacts once triggered. The existence of such thresholds or ‘tipping points’ is currently not well reflected in mitigation or adaptation policy and this oversight has profound implications for people and the environment...

 

...Exposed assets on NE coast of the US - The impact of an additional 0.15 m of SLR affecting the NE Coast of the US as a result of the localized SLR anomaly means that the following port megacities may experience a total sea level rise of 0.65 m by 2050: Baltimore, Boston, New York, Philadelphia, and Providence. 0.65 m of SLR is estimated to increase asset exposure from a current estimated $US 1,359 billion to $US 7,425 billion. The additional asset exposure from the regional anomaly alone (i.e. 0.65 versus 0.5 m) is approximately $US 298 billion (across the above mentioned cities alone).

Insurance aspects - The critical issue is the impact that a hurricane in the New York region would have. Potentially the cost could be 1 trillion dollars at present, rising to over 5 trillion dollars by mid-century. Although much of this would be uninsured, insurers are heavily exposed through hurricane insurance, flood insurance of commercial property, and as investors in real estate and public sector securities.

 http://assets.panda.org/downloads/plugin_tp_final_report.pdf 

2 Comments – Post Your Own

#1) On December 20, 2009 at 11:17 PM, devoish (96.49) wrote:

IF all the carbon reduction promises made at Copenhagen come to fruition, the most likely result is a four degree (7f) rise in global temperatures.

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#2) On December 23, 2009 at 4:27 PM, lucas1985 (< 20) wrote:

@devoish,
The outcome of the COP15 can be seem as a glass half-empty or half-full depending on your point of view. I consider it mildly positive but probably I'll have to start hedging my bets in the next few years. Perhaps I'll move closer to the pole.

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