Calculating climate insurance: Changhua Wu shares her thoughts on climate risk

6 March 2014

Changhua Wu, Greater China Director of The Climate Group comments on the necessity of climate change insurance ahead of Swiss Re's upcoming 150 anniversary event in Beijing on March 21, where she will be speaking.

Despite many positive steps in recent years, China remains the single greatest greenhouse gas emitter worldwide. This is a sad reality and one which demands urgent attention given the human, environmental and economic costs of inaction.

There is an unequivocal economic cost to such high greenhouse gas emissions. In 2013, natural disasters such as droughts, floods and earthquakes cost China 421 billion yuan (US$69 billion), the latest data from the National Statistics Bureau highlights.

Similarly, the environmental impact of global warming is exceedingly clear. Acute smog in Beijing is causing photosynthesis in plants to stall and poses a considerable risk to agricultural life, research from the China Agricultural University’s College of Water Resources and Civil Engineering found. If sunlight isn’t able to reach Chinese soil, we cannot expect our crops to prosper.

But, most importantly, this level of pollution has a significant detrimental impact on people’s quality of life and predicted life expectancy. A study published by the Proceedings of the National Academy of Sciences of the USA, detailed how air pollution causes northern China’s residents to live an average of 5.5 years shorter than those who are based in Southern China.

In the North-eastern city of Harbin last October, the index measurement of PM2.5 (or particulate matter) hit a shocking 1,000 – bear in mind a level of 300 is recognized as extremely dangerous to human beings. 

Recognizing the Risk

Despite this clear evidence of the devastating impact of global warming, we have been slow to quantify and manage the risk associated with climate change. However, the tide is slowly turning.

A recent study by Swiss Re–a key partner of The Climate Group–tackled climate change head on. The insurance giant ranked the risks facing more than 600 urban areas globally, and found that China's cities are among the most exposed to natural disasters in the whole world.

In fact, the research highlighted that floods and typhoons in the Pearl River Delta, a densely populated area of 42 million people, pose a threat to more people than in any other metropolitan area globally. And as one of China's main economic centers, with an estimated GDP of around US$700 billion, the Pearl River Delta could incur massive financial losses from disasters such as typhoons, storm surge and earthquake, the report revealed.

Common sense dictates that the failure to act on climate presents a real threat to both the planet and humanity, and as such it is something which we should insure ourselves against.

I welcome Swiss Re’s confrontation of this bleak reality. The company is now re-framing the dialogue around climate insurance; I hope others will be mobilized to recognize the risk also. 

United Action for Risk Reduction

While Swiss Re’s pioneering stance is a step forward, it is vital to remember that the power to minimize this risk is in our hands. Just as human activity has negatively impacted global warming, so too can our actions contribute to a more sustainable future.

Indeed, every positive step towards clean energy reduces the risk associated with climate change, offering us greater control over our planet’s path.

To effectively reduce the risk associated with climate change it is imperative that all factions within society work together. The correct approach involves a three point plan: elite leadership, citizen engagement and corporate sustainability.

On taking office just under one year ago, Li Keqiang China’s Premier committed to tacking the country’s pollution problems and used his first official press conference to launch his renewable energy drive.

It was at that event that he stated: “We shouldn't pursue economic growth at the expense of the environment. Such growth won't satisfy the people.” Since then Kegiang has prioritized the Chinese Eco-Civilization strategy and overseen the introduction of five new emissions trading schemes during 2013. It is also notable that the government has raised the official wind energy target for 2020 to 200 gigawatts.

And then this week Premier Li Keqiang spoke at the opening of China’s important annual parliamentary sessions, where he boldly said the country is to ‘declare war’ on pollution. This is he highest level recognition of these critical issues. 

Citizen engagement on the other hand, can be seen through the establishment of the Future Academy. This program is certain to catalyze the Clean Revolution in Asia, with its mission to arm young Chinese entrepreneurs with the skills they need to set up their own green businesses and lead China's future low carbon economy.

Corporate sustainability also represents an immense opportunity for positive climate action. In 2013, China installed more solar panels than any country has before. With the right government incentives business leaders can drive their organizations forward in a cost effective and ethical way. Their involvement is crucial to the realization of the low carbon market.

A committed coalition of the state, civil society and business will be central to the effective management of climate change risk.

I'll be discussing how we can create such a coalition at Swiss Re's upcoming 150 anniversary event in Beijing on March 21, 2014. In the meantime, please share your own thoughts and questions as tweets to @ChanghuaWu. I also post in Mandarin on Sina Weibo.

Related news:

Report: Understanding China’s new low carbon growth plan

62 countries now have 'flagship' legislation on climate change

China closes gap behind US for renewables investment

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