Why are we walking away from climate risk?

Expectations are low as I write this on the eve of the COP27 Summit in Egypt.

With the global economy understandably dominating the agenda, climate change is no longer top priority.

In many ways this makes sense. Governments need to get a grip on inflation, and fast. Europe needs to continue to reset after Brexit. The US has mid-terms coming. In Asia, Chinese GDP growth is the lowest it has been for decades.

And yet, and yet…the brutal fact remains that catastrophic climate change is happening more rapidly and with greater intensity than the starkest warnings from scientists.

Look at the evidence: a record summer high in the UK of 40.3C; wildfires across Europe; the most severe flooding in Pakistan’s recent history… you get the picture.

The surprising aspect of all of this is not so much that global temperatures have risen faster than expected, it is instead that the consequences of this rise have been more extreme than expected.

To quote from climatologist Michael E Mann of Pennsylvania University:  “Many of the impacts of climate change such as increased weather extremes are now playing out faster than predicted, even though the warming itself is very much in line with model projections.”

From an emerging risk perspective, the effects of climate change clearly matter because they are, let’s be frank, leading to an increasing frequency and severity of natural catastrophe events – and associated insured losses.

In 2022, the reaction from large swathes of the market has simply been to retrench from writing property cat cover. This might help manage the balance sheet in the short-term, but as a serious and considered approach to emerging climate risks it is woefully inadequate.

Leaving the solution to governments and the charitable sector is not good enough. We as a market need to re-engage urgently with the climate debate. Aren’t we supposed to be the experts on risk?

Marcus Alcock

Editor, Emerging Risks