February 24th, 2010

UN Climate Change Conference in Copenhagen

Posted at 10:00 AM ET

Despite below-average insured losses in 2009, several international (re)insurers believe climate change is impacting both the number and severity of weather-related events. According to Swiss Re (1) , worldwide insured natural catastrophe losses averaged USD5.1 billion per annum between 1970 and 1989, but they jumped to USD27.1 billion per annum between 1990 and 2009. Munich Re (2) has also strongly advocated the need to tackle climate change, citing a 33 percent jump in the number of weather-related catastrophes in the last few years compared to the 1980s.

Such observations came as world leaders converged at Copenhagen for the 2009 United Nations Climate Change Conference in December. Much has been written about the expectations prior to the conference and what was agreed. In reality little progress was made at the 193-nation summit, with only a nonbinding ‘Copenhagen Accord’ agreed by five countries to show for two weeks of debate and two years of preparations.

The accord, brokered by the United States, China, India, Brazil and South Africa, set a target of limiting temperature rises to no more than 2°C above pre-industrial levels. The deal also promised to deliver USD30 billion of aid for developing nations over the next three years, and outlined a goal of providing USD100 billion a year by 2020 to help poor countries cope with the impact of climate change.

On the positive side, the accord successfully unites the US and major developing countries in the effort to curb gas emissions, something not achieved by the Kyoto Protocol (3). However on the flip side, the accord is not a legally binding treaty, it fails to say how the 2°C limit will be achieved and it does not commit countries to agree on a binding successor to Kyoto. Moreover, no specific details were given on how the developed nations will raise the billions of dollars of annual aid.

Ultimately, the conference merely “took note” of the new accord and several countries that had been pushing for more radical steps only reluctantly accepted the deal. Several other countries, some particularly vulnerable to climate change, insisted the accord does not guarantee the temperature targets they need and opposed the deal.

Some senior figures within the insurance industry have already criticised the conclusions reached at Copenhagen and have urgently called for more radical progress. Several obstacles need to be overcome over the next 12 months and plenty of work lies ahead if a new global pact is to be agreed at the next round of climate talks in Mexico in November 2010.

1  Swiss Re - http://www.swissre.com/pws/about%20us/knowledge_expertise/top%20topics/natural%20catastrophes/nat_cat_cover.html
2  Munich Re Press Release - http://www.munichre.com/en/press/press_releases/2009/2009_11_26_press_release.aspx
3 The Kyoto Protocol of 1997 committed 37 developed countries to reduce their gas emissions, but it imposed no obligations on developing countries to do the same, and the US never agreed to it.

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