UN Secretary General António Guterres said in an April 2022 interview that climate change is putting us ‘firmly on track towards an unlivable world’. A scary thought indeed, and one which has generated much discussion in the scientific community as of late. 

A recent study by Kemp et al. (2022) on ‘end-game’ climate change scenarios begins with a question: how bad could climate change get? The authors go on to review scientific literature around worst-case scenarios, specifically those events (or cascade of events) which could plausibly lead to mass morbidity and mortality, and find that the chief contributors to a climate-induced end-game are famine and undernutrition, extreme weather events, conflict and vector-borne diseases. The risks posed by climate change to the global economy also have the potential to be so far-reaching that climate change should in itself be termed a systemic risk, defined here as the potential for abrupt, global scale impact with dire implications for humanity. 

Prudent catastrophe risk management requires knowledge of extremes. Sometimes termed ‘tail’ risks, extreme events are familiar underwriting challenges for (re)insurers, who look to probabilistic modelling of the hazard, exposure and vulnerability to quantify and inform placement of the risk(s). Whilst generally accepted practice, the current industry approach of immediately narrowing the physical risk of climate change question to catastrophe model related 'peril-regions' misses the broader systemic risks of climate change that Kemp et al. describe.  

For example, Armstrong McKay et al. (2022) investigate several climate tipping points and the temperature thresholds likely to initiate climate-linked systemic risks (see the below image). Among these, they highlight the vulnerability of the world’s ice sheets to mass loss and potential collapse events due in large part to anthropogenic-induced oceanic and climatic warming. A recent paper by Herraiz-Borreguero & Naveira Garabato (2022) suggests that, since 1930, westerly winds pushing warm waters towards the East Antarctic ice sheet have already thinned the region’s ice masses at alarming rates. The largest in the world, the East Antarctic ice sheet contains the vast majority of Earth’s glacier ice (~52 metres sea-level equivalent, Stokes et al., 2022). Should a major collapse event occur, as it did some 400,000 years ago, a coinciding global sea-level rise of several metres is not unreasonable. As it pertains to the risk-transfer industry, there has yet to be a study which explores the economic and/or insured loss implications from substantial coastal flooding which would inevitably result from the collapse of large segments of the East Antarctic ice sheet.

Contemporary catastrophe models have fallen into a trap of discretising the world into peril-regions such that their ability to assess the systemic risks from climate change would necessitate major redesign. It is not unreasonable then to argue that the (re)insurance industry is ill prepared for the financial shock that would be generated by many of the hypothesised climate tipping point events, even if their onset is not on business (i.e. annual) timescales. In a shameless plug, we at Max Info are developing the tools and knowledge to address these and other important catastrophe risk challenges of our time. 

References
Armstrong McKay, D. I., Staal, A., Abrams, J. F., Winkelmann, R., Sakschewski, B., Loriani, S., ... & Lenton, T. M. (2022). Exceeding 1.5° C global warming could trigger multiple climate tipping points. Science, 377(6611), eabn7950.

Herraiz-Borreguero, L., & Naveira Garabato, A. C. (2022). Poleward shift of Circumpolar Deep Water threatens the East Antarctic Ice Sheet. Nature Climate Change, 1-7.

Kemp, L., Xu, C., Depledge, J., Ebi, K. L., Gibbins, G., Kohler, T. A., ... & Lenton, T. M. (2022). Climate Endgame: Exploring catastrophic climate change scenarios. Proceedings of the National Academy of Sciences, 119(34), e2108146119.

Stokes, C. R., Abram, N. J., Bentley, M. J., Edwards, T. L., England, M. H., Foppert, A., ... & Whitehouse, P. L. (2022). Response of the East Antarctic Ice Sheet to past and future climate change. Nature, 608(7922), 275-286.