September 26th, 2013

Global Warming: Losses

Posted at 1:00 AM ET

Economic losses resulting from natural disasters increased from USD75.5 Billion in the 1960s to USD659.9 Billion in the 1990s (IPCC AR4, 2007 - Working Group II, Section 1.2.8.4). Insured losses have also increased, and “the dominant signal is of significant increase in the values of exposure” (IPCC AR4, 2007 - Working Group II, Section 1.3.8.4). Furthermore, the IPCC states that “failure to adjust for time-variant economic factors yields loss amounts that are not directly comparable and a pronounced upward trend for purely economic reasons.” As an example,the recent “trend” in hurricane losses for the coastal United States becomes indistinguishable when normalized by inflation and population density (Pielke et al., 2008).

The IPCC identifies a number of possible adaptation measures for the hazards posed by global warming. Such measures again include the development and improvement of codes and standards for wind and flood resilience in vulnerable areas. This is especially important for developing countries where over 95 percent of weather-related fatalities occur. Land use strategies again are identified for flood-prone areas to shift unnecessary development to less vulnerable areas or to improve flood control measures where such developments exist. Such resilience measures can help to curtail long-term weather and climate losses under global warming.

The coastal flood threat is particularly acute under global warming, and emphasizes the need for a flood risk transfer strategy that is actuarially sound and also meets the complex network of regional, physical, economic and political constraints in force for such areas.

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