By Praveen Gupta
Those are not my words in the heading, but will surely resonate with many. Let me share some compelling reasons.
The strain of the highly pathogenic avian influenza virus H5N1, currently spreading among dairy cows in the U.S., only needs a single mutation to readily latch on to human cells found in the upper airway. This could have major implications for a new pandemic, if such a mutation were to become widespread in nature.
In close proximity to the above findings comes a release from Lloyd’s of London – the pre-eminent insurance and reinsurance market in the world – that the global economy could be exposed to potential losses of USD 13.6 trillion over a five-year period from the threat of a hypothetical future human pandemic.
H5N1, a subtype of the influenza A virus, has affected a wide range of animal populations, including wild birds, bears, foxes, a variety of marine mammals, and, most recently, dairy cows. Photo: Public Domain/Niaid/Cdc.
These losses could result from widespread disruption across global industries owing to local lockdowns and global travel restrictions. With the transportation sector worth more than 10 per cent of global GDP, sustained international travel restrictions could result in significant economic costs.
Whilst on the subject, I am always reminded of how organisers of Wimbledon 2020 mitigated potential financial loss, as the event was cancelled, by means of an infectious diseases cover. Likewise, smart risk management saved the University of Illinois Urbana-Champaign despite the loss of revenue from mainland Chinese students – one of their biggest sources of income – not turning up in the year of COVID.
Ever since, the insurance industry has developed a range of specialist solutions to help manage the risks associated with pandemics. This includes affirmative cover for new outbreaks of known and unnamed infectious diseases; insurance for development, transit and storage of vaccines; and protection against interruption or cancellation of events during a pandemic. The insurance industry has discovered a segment ripe for monetisation. What was once conveniently labelled as a black swan event is now a market development opportunity!
The H5N1 virus responsible for the current outbreak was first detected in North America in 2021. According to the Scientific American, it has affected a wide range of animal populations, including wild birds, bears, foxes, a variety of marine mammals, and, most recently, dairy cows. Surprisingly, nowhere does the report by Lloyd’s allude to a zoonotic trigger emanating from biodiversity loss.
Its CEO, John Neal, has identified that “Lloyd’s has a unique position and opportunity to bring together communities, businesses, insurers and governments to find solutions to the systemic risks that threaten our shared future”. Whether that will be achievable – notwithstanding the climate breakdown – is conspicuous by its absence from the narrative and blind spots, such as the ones described below.
“Climate models are falling behind reality. New research reveals that real-world data shows more extreme and unexpected climate changes than models predict,” writes Kasper Benjamin Reimer Bjørkskov. His findings come from ‘Global emergence of regional heatwave hotspots outpaces climate model simulations’, a study by Kai Kornhuber, Samuel Bartusek, Richard Seager, and Mingfang Ting in Proceedings of the National Academy of Sciences (PNAS).
Most models, he explains, cannot simulate the small-scale processes that drive Earth’s climate systems such as jet streams, cloud formation, soil moisture interactions, and ocean currents. These daily processes combine in complex ways that models can’t fully capture. Thereby
* Extreme events (such as heat, storms, and marine heatwaves) are occurring faster and more intensely than existing models predict.
* The interconnected systems of land, atmosphere, and oceans are reacting in non-linear ways and amplifying in a manner we didn’t expect.
* Climate models underestimate extreme trends by up to 4x in some areas.
Two-thirds of the Earth’s population depends on monsoon rain, largely to grow its crops. Research is scant on how a possible shift of rain bands to the south could impact India, east Asia and west Africa. Photo: Asian Development Bank/ CC BY-NC-ND 2.0.
Our understanding of the climate crisis must, therefore, evolve – models need to account for these overlooked processes. Moreover, the gap between models and reality is widening. The science is clear – the climate is changing faster than we are prepared for. A key message coming out loud and clear from climate scientists (PNAS study mentioned above) is that “the best way to reduce both uncertainty in and exposure to climate impacts is a rapid transition of relevant societal sectors away from fossil fuels to stabilise global temperature rise”.
Imagine the implications of the highlighted deficiencies in the models used by reinsurers and insurers in their risk evaluations. These are, without doubt, compelling reasons for money pipelines (not just insurers) to hasten moving away from fossil fuel.
The paper Climate Endgame: Exploring catastrophic climate change scenarios in PNAS makes a strong case for why planetary wellbeing should not be ignored. Allow me to highlight some of the crucial messages:
* Climate risks are becoming more complex and difficult to manage, and are cascading across regions and sectors.
* There is ample evidence that climate change could become catastrophic.
* Understanding extreme risks is important for robust decision-making, from preparation to consideration of emergency responses.
* We could enter such “endgames” at even modest levels of warming. This requires exploring not just higher temperature scenarios but also the potential for climate change impacts to contribute to systemic risk and other cascades.
* A thorough risk assessment would need to consider how risks spread, interact, amplify, and are aggravated by responses from people.
* Even simpler ‘compound hazard’ analyses of interacting climate hazards and drivers are underused. Yet this is how risk unfolds in the real world. For example, when a cyclone destroys electrical infrastructure, it leaves a population vulnerable to an ensuing deadly heat wave.
* Too much is at stake to refrain from examining high-impact low-likelihood scenarios. The COVID-19 pandemic has underlined the need to consider and prepare for infrequent, high-impact global risks, and the systemic dangers they can spark.
* It is time to seriously scrutinise the best way to expand our research horizons to cover this field, suggest the authors.
* The proposed “Climate Endgame” research agenda provides one way to navigate this under-studied area. Facing a future of accelerating climate change while blind to worst-case scenarios is naive risk management at best and fatally foolish at worst.
* The Intergovernmental Panel on Climate Change (IPCC) has yet to give focused attention to catastrophic climate change. This does appear warranted, following the IPCC’s decision framework.
* Such a report could investigate how Earth system feedback could alter temperature trajectories, and whether these are irreversible.
There is growing evidence that climate change could be catastrophic, yet fossil fuel emissions reached record highs in 2024. The past year alone has seen a series of severe climate disasters around the world. Extreme events (such as heat, storms, and marine heatwaves) are occurring faster and more intensely than models predict. Photo: Asian Development Bank/CC BY-NC-ND 2.0.
The Atlantic Meridional Overturning Circulation (AMOC) is part of a single conveyor belt of continuous water exchange that transports water throughout the world’s oceans. It is the main ocean current in the Atlantic ocean, including at the surface and at great depths that are driven by changes in weather, temperature, and salinity.
Humanity is driving up unhindered fossil fuel burning and relentless deforestation (particularly in the Amazon), and also the related skyrocketing greenhouse gas (GHG) emissions, and melting Arctic and Greenland, which are transforming water chemistry and dynamics. This is leading to a slow down, and, eventually, a tipping point as per renowned scientists such as Stefan Rahmstorf.
A weaker AMOC would decrease the movement of hot and cold ocean water, bringing less warm water northwards, leaving warmth in the tropics, and cold in the polar areas. This could make hot areas hotter and cold areas colder. This slowing down of the AMOC could affect precipitation patterns, strengthen storms, and raise the sea level along the North American Atlantic coast.
Research is scant on how a possible movement of rain bands moving south could impact India, east Asia and west Africa. These geographies could very well lose much or all of their monsoon seasons. Two-thirds of the Earth’s population depends on monsoon rain, largely to grow its crops.
These changes could happen within only a few growing seasons rather than over generations, leaving little time to adapt. Just like several plant and animal species that would not be able to adapt fast enough to changing weather patterns, and thus face the risk of extinction.
Cascading global climate failure. This is a causal loop diagram, in which a complete line represents a positive polarity (e.g., amplifying feedback; not necessarily positive in a normative sense) and a dotted line denotes a negative polarity (meaning a dampening feedback). Source: https://www.pnas.org/doi/full/10.1073/pnas.2108146119 Photo: Climate Endgame: Exploring catastrophic climate change scenarios/CC BY 4.0.
While the full impact of the system settling into a much weaker flow, or even a total collapse, is not fully known, there is no doubt that the effect would be catastrophic. Not only is the scientific community beginning to raise frequent alarms, but it is also alerting that the turn of events could bring forward the likely date of such a possibility.
Financial services have not even woken up to what might be coming, and how they would mitigate, adapt and become more resilient to the challenges a slowing AMOC poses. Can insurers afford to procrastinate? Yet, the AMOC and its condition are not on their radar.
If anyone, particularly insurers, assume that the lessons from the last pandemic have equipped them to effectively handle the next one; or the climate models in current usage are effective enough to address climate risk/s; or that the IPCC’s wishy-washy attention to catastrophic climate change, without investigating how Earth system feedbacks could alter temperature trajectories and whether these are irreversible – we have a serious existential problem on hand. The title sums it all up.
Sandy Trust, an actuary, has issued a daunting prediction: “Increasingly severe climate- and nature-driven impacts are highly likely, including fires, floods, heat and droughts. This is a national security issue as food, water and heat stress will impact populations. If unchecked then mass mortality, involuntary mass migration events and/or severe GDP ontraction are likely.”
Similarly, German reinsurer Munich Re’s Chief Climate Scientist has warned that “climate change is taking the gloves off.” We can be sure of one thing – an LA-like ‘pralaya’ (Sanskrit: for dissolution or melting away) will keep manifesting with greater frequency and intensity.
Praveen Gupta is a former insurance CEO. e believes insurers have a critical and urgent role to play in nurturing our environment. Venice based Illuminem – one of the Top Digital Media Startups in the Sustainability space – adjudged Praveen as “Most Read in Climate Change 2024”.