TL: INSURERS AND BANKERS WAKING UP TO CLIMATE CHANGE SO: Greenpeace International (GP) DT: March, 1995 Keywords: atmosphere energy greenpeace climate change business / The climatic destabilization which would be caused by climate change now clearly threatens insurance companies with unmanageable catastrophe losses, threatening banks with significant physical risks to the projects for which they provide loans. These institutions are now starting to recognise that a destabilising climate could well cause untold economic disruption. Leading insurers speak in growing numbers of their fears that global warming could bankrupt the $1,400 billion insurance industry. A collapse of global property-catastrophe insurance reserves in the face of escalating windstorm, flood, and drought- related wildfire losses would pose dire knock-on economic problems. These would apply to insurers, bankers, and pension funds alike. Investments at risk The private financial institutions control a vast and growing share of equity markets. Global warming threatens the long term security of fossil fuel investments - whether by the private financial institutions, or other institutions - in a way which is as yet little appreciated by investors. Investing in carbon-fuel industries - coal or gas-fired power plants, or oil exploration projects, for instance - may seem like safe bets in 1995. But coal, oil and gas (the carbon fuels) are by far the largest source of the greenhouse gases which cause global warming, the effects of which may already be taking its toll on those who invest in carbon fuels. Greenpeace commissioned a report from the Delphi Group of financial consultants, written by a former Director and Chief Analyst with Chase Investment Bank. 'Climate change presents major long term risks to the carbon fuel industry,' this report concludes. 'These risks have not yet been adequately discounted by financial markets.' Insurers The President of the Reinsurance Association of America told Time magazine in 1993 that: 'the insurance business is first in line to be affected by climate change... it could bankrupt the industry.' Greenpeace has now heard such sentiments expressed, by very senior figures in the industry, in London, Zurich, Munich, New York, and Tokyo. Eugene Lecomte, President of the US Insurance Institute for Property Loss Reduction, explained the worst-case analysis in 1993 at a conference on climate change organised by Greenpeace, the US College of Insurance, and insurance consultants ET&T. 'Despite the fact that the industry is financially healthy,' Lecomte said, 'and has some $160 billion in surplus, in two events you could take 70 billion, or maybe 80 billion of that surplus away and you'd cripple the industry. It wouldn't be able to take on new risks. It wouldn't have the capacity to underwrite the business of the future. We'd have massive, massive availability problems.' In 1993, Munich Re, the world's largest reinsurer, called on governments, businesses, and insurers alike to 'take immediate action' to address the 'dramatic development of natural catastrophes. ...The threatened climatic changes demand urgent and drastic measures,' the company stressed. In the UK, the Chartered Insurance Institute Society of Fellows set up a Study Group on climate change and insurance. It concluded in a 1994 report that 'the industry has a limited breathing space in which to gather its wits, and plan in a truly long term timeframe.' It recommended many options, one of which was that 'all investment managers should modify their investment policies to take account of the potential direct and indirect effects of global warming. Swiss Re, the world's second biggest reinsurer, wrote in a 1994 report that: 'human intervention in the natural climatic system could accelerate global climatic change to such an extent that society may no longer be able to adapt quickly enough.' It noted that society had a duty to respond, and that 'there is no shortage of practical suggestions, especially with regard to a drastic reduction of greenhouse gases' Published by Greenpeace Communications for Greenpeace International 5 Bakers Row London EC1R 3DB Tel: 44 171 833 0600 Fax: 44 171 837 6606 (PICTURE CAPTIONS) 1) & 2) Damage caused in 1992 by hurricane Andrew in Miami, Florida. The most expensive US disaster ever. It caused $30 billion of damage. 3) Mississippi river flooding a sewage treatment plant in St Louis. ===============================================================