Climate changes business models

Although the current financial crisis in Europe has pushed climate change down the agenda in the public sphere, it is still a very high priority for businesses. The enormous damage caused by major floods in Europe, the US, Thailand and Australia over the last years has demonstrated the need of producing risk models to anticipate the likelihood and severity of flooding in vulnerable areas.

The unprecedented rainfall in the Venice region on September 26, 2007, with intensity close to 300mm per day measured at one station, served as the reference event for the study which offers a blueprint for innovate climate modelling. The cutting-edge approach in applying climate science to business is unique in several regards:

  • The potential climate change impact on the business model of a large insurance company is assessed
  • A previously under-researched peril is analyzed by linking observed current rainfall extremes and flooding to future climate risks by the means of climate and hydrological modeling
  • The project developed new methods that can be applied globally when sufficient observations exist. The researchers made progress particularly by increasing the resolution of the currently available climate model from 100 x 100km to 5 x 5km.

The anticipation of flooding is a high priority for insurance businesses  

"This was really uncharted territory, but we now have a much better idea of how we could better model these events in future. The work that was done here is not only relevant for the insurance industry to better understand the ranges of uncertainty addressed by these models and methods, but it will also be of interest for certain sections of the scientific world," says Dr. Markus Stowasser of Allianz Re's catastrophe research and development unit.

While the value of the study is much less in actual predictions and more in the potential and possibilities of new methods and processes, the study indicates that an increase in the intensity of future surface flooding events in the selected area is plausible. For a deeper insight into the study settings and its results, please refer to the attached document.

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Nicolai Tewes

Allianz SE
Phone +49.89.3800-4511

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