UNEP Insurance Industry Initiative for the Environment

1 November 1997

More than 70 insurance companies from 25 countries have come together under the United Nations Environment Programme to constitute the UNEP Insurance Industry Initiative for the Environment. Among members are General Accident and N.P.I. (UK), Gerling-Konzern Global Reinsurance Company (Germany), Sumimoto Marine and Fire Insurance (Japan), Swiss Reinsurance Co. (Switzerland and Storebrand (Norway).

Natural disasters represent 85 percent of all insurance losses, and more than 50 percent of those losses have occurred since 1990. The Intergovernmental Panel on Climate Change, which consists of nearly 2000 scientists, has predicted that the global mean temperature will rise from 1 to 3 °C by the end of the next century. Although the precise effects of such a rise are hard to determine, many regions are expected to experience more climate-related disasters than they do now. Low-lying coastal regions are particularly at risk.

Insurers are concerned about the damage caused by more frequent and severe windstorms, floods and mud slides likely to result from significant global warming. A higher risk of extreme events due to climate change could lead to higher insurance premiums, or even restrictions or unavailability of property coverage in the most vulnerable areas. If unexpectedly severe events start bankrupting insurance companies, other economic sectors such as banking and public finances could feel the ripple effects. Climate change could also affect stock markets and investment activities as society adapts to the new climate regime. Because the insurance industry operates by managing long-term savings and investments prudently, it cannot ignore the possible effects of climate change and other environmental problems on long-term pension and life insurance portfolios.

At the Climate Convention's second Conference of the Parties in July 1996, insurers presented a position paper on Insurance and Climate Change, highlighting the industry's concern that, while the effect of climate change on the frequency or severity of extreme weather events remains unknown, it is clear that even small shifts in regional climate zones or storm patterns could lead to increased property damage. They called for early and substantial reductions in greenhouse gases. A second position paper will be released during the Kyoto meeting.

Contact: Bernd Schanzenbächer, UNEP; tel: (41-22) 979-9302; fax: 796-9240; or Michael Williams, Information Unit on Conventions, tel: (41-22) 979-9242/44; fax: 979-3464; e-mail: mwilliams@unep.ch
Policy Forum on Greenhouse Gas Initiatives

From 12-14 November, UNCTAD and the Earth Council hosted the second session of the Policy Forum on Greenhouse Gas Emissions Trading in Toronto. The Forum was launched in Chicago last June `to provide timely institutional support to interested governments, corporations and non-governmental organisations (NGOs), for the development and implementation of the initial phase of an international greenhouse gas emissions market.' The launch of the emissions market is set for early 2000.

Forum participants include government authorities, corporate executives, intergovernmental organisations and environmental NGOs. The organisers hope that the Forum will contribute to sending a strong message of support to governments negotiating the Kyoto Protocol for the use of market-based instruments to deal with greenhouse gas emission reductions. The United States, for instance, has been successful in lowering acid rain through the establishment of a `cap' on emissions, and then issuing permits to companies allowing them to emit up to that capped level. Companies that succeed in holding their emissions below the legislated cap can sell the spare capacity allowed by their permits to other companies looking for cost-effective solutions.

UNCTAD believes that using a similar approach to address greenhouse gas emissions globally could produce `win-win' outcomes for interested parties: international greenhouse gas emissions trading could substantially cut abatement costs while opening up new economic, financial, and business opportunities for developing countries and countries in transition. UNCTAD has been working on the design and implementation of an international greenhouse gas emissions trading system since 1991 and has published extensive studies on the issue.

Contact: Frank Joshua; Division on Globalization and Development Strategies; UNCTAD; tel: (41-22) 917-5834/5831; fax: (41-22) 907-0274; e-mail: frank.joshua@unctad.org; or: Carine Richard-Van Maele, Press Officer, UNCTAD; tel: (41-22) 917-5816/28; fax: (41-22) 907-0043; e-mail: press@unctad.org.

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