Klawa: Yes, we think so. In the last 20 years, the temperature in Europe has risen approximately one degree Celsius above its previous long-term average. We agree with the view held by the majority of scientists that greenhouse gases are a significant contributor to this change and that it will thus continue.

Klawa: When it comes to predicting climate change, opinions differ wildly. There are a number of greenhouse gas scenarios, all of which are based on different assumptions about global development. We ourselves expect temperatures to rise by a further one or two degrees Celsius by 2050. Basically, it is impossible to predict what will happen with absolute certainty. There is also disagreement about the extent to which measures implemented now can influence the climate of the future, that is whether or not we can slow down global warming.

What is certain, however, is that the costs incurred as a result of natural disasters have increased dramatically in the last few decades. Admittedly, this is due in part to industrial development, since the damage caused by storms is now more costly to repair. For example, a devastating hailstorm like the one which hit Munich in 1984 would now lead to far more costly damage, just one reason for this being the fact that the number of vehicles in Germany has risen by 70 percent since then.

Yet despite this uncertainty, we must expect that in many regions there will be more extreme weather events.

Klawa: It appears that in many parts of Europe there will be fewer days of rain, but that the rainfall on those days will be greater. That makes dry periods like the one in the summer of 2003 and floods like those in 2002 more likely.

These dry periods could also cause forest fires and erosion. Moreover, due to the rise in the sea-level, there will also be an increased risk of storm floods.

The four big hurricanes of autumn 2004 might have led us to conclude that global warming caused by human activity will significantly affect the number of hurricanes which hit North America, but in fact we don't expect that since natural variables also play a part in this phenomenon.

Nevertheless, it is conceivable that the areas where typhoons and hurricanes occur could expand or even shift. At the moment, for example, there is considerable debate about the tropical cyclone which occurred off the coast of Brazil, an area which has so far not been considered to be at risk.

Klawa: Up to now we have not been particularly systematic in our approach to the risks posed by climate change, and yet they affect our business dealings in many different ways. Our first step will be to obtain a better overview of the risks so that we are in a position to adopt the right business solutions.

Our project "Climate Change and its Effects on the Financial Services Industry" will help us to do just that. We will be presenting some of the results of the study in London on June 28.

Klawa: Climate change creates significant economic risks which are extremely varied. Reinsurers and primary insurers play a particularly important part in dealing with its consequences.

For example, in 2004 insurers worldwide paid out almost 50 billion US dollars on claims related to natural disasters. That was a record high, and reinsurers estimate that more than 90 percent of all the insured losses were due to weather events.

Bogenrieder: In the short term, nothing will change as far as they are concerned. But whether it was caused by climate change or not, the flood of 2002 showed us that no one can afford to assume that they are "safe". For this reason, we advise homeowners and companies to take out insurance against natural forces, which is not expensive.

Bogenrieder: In Germany, we now have a new and even more precise flood-zoning system. Now that we are using this, people living in some residential areas which were previously considered too high a risk can obtain insurance.

Bogenrieder: Building a wall between the river or stream and the house can help to protect it. It is also important not to store anything of value in the basement, as it is obviously the first room to be flooded. We are less convinced by the protective covers on the market at the moment, though, as by the time someone decides to "package up" their house using those, it is usually already too late.

Moreover, anyone building or purchasing a new home should definitely do their research and avoid properties built on land which is in danger of flooding. Anyone who moves into a house next to a river which floods every few years should be aware that they are entering into a considerable amount of risk which simply cannot be passed on to an insurance company.

However, there really is very little that private individuals can do to protect themselves from such extreme flooding as we saw in 2002. In that case, the right insurance policy is the only thing that can help.

Klawa: And of course it's also a good idea for people to encourage the reduction of greenhouse gases and oppose the sealing of soil surfaces through construction.

Klawa: That's right. The summer heatwave of 2003 was a good example of that. When temperatures are so high, peoples' circulatory systems struggle to cope, and some estimates ascribed up to 30,000 deaths to the heat.

Other problems which are linked to global warming range from a higher risk of skin cancer to faster spreading of tropical and exotic diseases.

Dr. Matthias Klawa is a meteorologist responsible for climate issues in the Natural Disasters department at Allianz Reinsurance.

Olav Bogenrieder is head of corporate insurance at Allianz Versicherung and is a member of the Association of German Insurers' (GdV) working party on floodwater zoning.


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