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Landmark IPCC Report emphasises the scale of the challenge for our sector

On Monday 9th August, the Intergovernmental Panel on Climate Change (IPCC) issued a report on the Physical Science Base on climate systems and climate change.

It concluded that climate change is “widespread, rapid, and intensifying”, with changes observable in every region of the globe that are “in thousands, if not hundreds of thousands of years”.

The report received widespread media coverage, much of this emphasising in particular the conclusion that the evidence demonstrating the role of human activity in causing global temperature rises is “unequivocal”. Prime Minister Boris Johnson described it as “sobering reading” that he hoped would be a “for the world to take action now, before we meet in Glasgow in November for the critical COP26 summit”.

Although the report is designed to provide an evidence base to inform policymakers, rather than make policy recommendations, the report does emphasise that it is only under the very low and low GHG emissions scenarios that it is more likely than not that the 1.5°C goal in the Paris Agreement would be met.

Below, I have summarised the main findings from the analysis and suggested two key takeaways for our sector. You can also read the IPPC’s summary of the headline conclusions from the report here.

Global Temperature Rises

The main conclusion of the report is that global surface temperatures between 2000-2020 were 1.1°C higher than they were between 1850-1900. This level of warming is higher than previously thought, with the estimate having increased by 0.1°C since this assessment was last conducted in 2013.

This leads the authors to state categorically that “Human influence has warmed the climate at a rate that is unprecedented in at least the last 2000 years.”

The report concludes that, without significant action in the coming decades, increases in global temperature above 1.5°C and 2°C will be unavoidable.

It also emphasises that any further increases in temperature will exacerbate the impacts of climate change that already occur. With every additional 0.5°C increment of global warming, changes in extremes continue to become larger.

Waves Lighthouse

Extreme Weather

The report emphasises that every region of the world is already being impacted by weather pattern changes that can be linked to climate change, experiencing either increases in extremely hot weather, increased precipitation or drought.

The report also identifies a wide range of changes to weather patterns, including:

  • Intensifying the water cycle and changing rainfall patterns – this has different impacts in different regions, with both increased rainfall and flooding in some parts of the globe and more droughts in others, with some regions will see significant changes to monsoon patterns
  • Continued sea level rise throughout the 21st century – this will have a particular impact on coastal regions, with weather events that were previously seen as 1 in 100 year events occurring annually
  • Amplified permafrost thawing – resulting in amplify permafrost thawing, and the loss of seasonal snow cover, melting of glaciers and ice sheets, and loss of summer Arctic sea ice
  • Continued changes to ocean conditions throughout the 21st century – this will include frequent marine heatwaves, ocean acidification, and reduced oxygen levels, with a major impact on communities that rely on the ocean

The report also emphasises that these challenges will be especially significant in cities, which are especially vulnerable to heat rises and flooding, and a particular cause of concern for coastal cities.

Many of these changes to weather patterns and ocean conditions are now unavoidable, but will be further impacted by “each additional tonne” of carbon dioxide that is emitted into the atmosphere.

The report also looks at air pollution, where it notes that reductions in greenhouse gas emissions alone will not return air pollution levels in those areas with unsafe levels of pollution to normal, and specific action to remove specific pollutants from the atmosphere continues to be needed.

ABI Analysis: Implications for Insurers

The report is not a sectoral analysis and does not directly address our sector. However, as the ABI emphasises in our recently published Climate Change Roadmap, ours is a sector that is directly impacted both by the societal changes needed to reduce emissions and by the physical impacts of rising temperatures.

Therefore, a key takeaway for our sector from this analysis should be the interconnectedness and unpredictability of the weather pattern impacts being caused by climate change. While we can predict that the impacts will be significant, it is clear that disruption to one part of the weather system will, in turn, have contrasting impacts in other regions of the globe.

For insurers, this means that models based on historical data are becoming increasingly redundant. In particular, I was struck by the conclusion that coastal weather events previously classed as being 1 in 100 year events are now likely to be observed each year.

Secondly, the report’s analysis of five emission reduction and temperature scenarios shows how important early action will be to containing global temperature rises. Although the 2050 Paris targets remain long term, the action needed to reach these targets is not – significant policy changes will need to be well established by 2030.

While it is likely that individual governments will reach different conclusions about the actions they need to take and the pace of change, key sectors that operate across the global economy will have little choice but to adapt their business models in line with the most ambitious global governments.

This means that we can expect significant policy change in the near future. As Patrick Vallance, the Government’s Chief Scientific Adviser, observed in his response to the report, “nothing short of transforming society will avert catastrophe.”

As a sector that is embedded and interlinked across the whole economy, this will have a major impact on operating models.

Background: What is this report and why is it significant?

This report has been issued by the first of the three IPCC Working Groups (WG I). This working group is focussed on assessing the physical scientific basis of the climate system and climate change.

Two further working groups look at the vulnerability of socio-economic and natural systems to climate change (WG II) and the options for mitigating climate change (WG III). These three working groups will each be publishing reports that, combined, will form the IPCC’s Sixth Assessment report, due to be completed by 2022.

This report is the output of 234 authors from 66 countries, 517 additional contributors and 78,007 submissions from experts and governments. The 195 member governments of the IPCC approved the report in a two-week virtual session between 26 July and 7 August.

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Last updated 10/08/2021