After years of negotiation, two historic climate change agreements aimed at mitigating the effects of global warming have finally come to fruition. The deal signed in Kigali, Rwanda, on October 15, 2016, resulted in 170 countries agreeing to cut consumption of hydrofluorocarbons (HFCs), a potent chemical used in air conditioners and refrigerators. While HFCs make up a small percentage of greenhouse gasses, they have more than 1,000 times the heat-trapping impact of carbon dioxide; scientists have estimated that phasing HFCs out will prevent global temperatures from rising by 0.5°C.
What's great about the Kigali accord is the specificity with which different countries have agreed to begin curbing their consumption. Developed nations, such as the U.S., are set to begin reducing HFC use in 2019. Most developing nations will start curbing usage in 2024, and a few of the world's hottest countries have until 2028 to follow suit.
The Kigali agreement comes on the heels of the Paris Climate Accord, which was ratified on October 5, 2016, when the required 55 countries that represent at least 55% of all greenhouse gas emissions on earth reached consensus. Countries have pledged to curb greenhouse gas emissions with the goal of preventing global temperatures from rising no more than 2°C above pre-industrial levels. Climate experts have said that any greater increase would put the world on an inevitable path of rising sea levels, increased heatwaves and flooding, and more intense storms.
Compared to that reached in Kigali, the Paris agreement is a bit vaguer in terms of scope and timeline, but it represents a critical step forward in reaching a worldwide consensus of the threat posed by global warming.
While it is often up to individual countries to follow through on enforcing these types of agreements, having an understanding of what the future might hold as global temperatures continue to rise is increasingly important for planning an insurance company's long-term risk management strategy.
At AIR, we recognize that climate change matters to the insurance industry and our catastrophe models reflect long-term climate behavior. We're thinking about how climate change is impacting severe weather events and we are always asking ourselves questions like, "what would the frequency and intensity of hurricanes look like as sea surface temperatures and other environmental conditions continue to respond to increased global warming?"
The incessant demand for properties on the U.S. East Coast and Gulf Coast is a difficult challenge to address, and the changes brought on by climate change will only continue to drive up insured losses there.
If executed, the proposals brought on by the Kigali and Paris climate agreements could do a lot to slow down the effects of global warming. We'll continue to evaluate a variety of scenarios, from complete fulfillment of these agreements to worst case scenarios, so society can be more resilient and the insurance industry can prepare.
