Risk managers urgently need to pay attention to rising sea levels

Risk managers need to pay urgent attention to rising sea levels, after scientific research suggested the risk could be much greater than previously thought, according to Zurich Insurance. Sea levels around the world have been rising with global warming. They have been increasing during the past century, and the rate has accelerated in recent decades. Sea levels rose almost twice as fast between 1993 and 2010 as in the previous century, according to the Intergovernmental Panel on Climate Change (IPCC). However, forecasts now suggest the pace of change is accelerating and that the impact is likely to be felt earlier than previously expected. A recent research paper published by the Proceedings of the National Academy of Sciences of the United States of America (PNAS), says that global sea levels could rise by more than two metres by the year 2100, assuming a high-emission scenario. This is more than twice the height predicted by the IPCC in its Fifth Assessment Report, which forecasted a one-metre rise in sea levels by the end of the century. A report from Australian thinktank Breakthrough National Centre for Climate Restoration also suggests the IPCC understates the risk, warning that sea levels could increase three metres by 2100 and up to 25 metres in the longer term. A study by the US National Oceanic and Atmospheric Administration in 2017 proposed a worst-case sea-level rise scenario of 2.5 metres by 2100, 5.5 metres by 2150 and 9.7 metres by 2200. The impact on economic activity from rising sea levels could be seismic. The UK’s National Oceanographic Centre predicts the global cost of rising sea levels will be $14trn a year by 2100. This is largely due to vulnerable infrastructure, such as energy plants, water treatment facilities, underground communications cables and transportation networks, including ports and railways. Rising sea levels are an important risk that will soon affect cities, industries and agriculture around coastal areas and river systems. Rapidly growing cities and climate change will make more people vulnerable. According to Zurich, two thirds of the global population is expected to live in cities by 2050. Almost 40% of the US population lives in coastal areas, while eight of the world's ten largest cities are near the sea, according to the UN Atlas of the Oceans. The World Economic Forum’s Global Risks Reportestimates that 800 million people in more than 570 coastal cities are already vulnerable to a sea-level rise of 0.5 metres by 2050. A rise of that magnitude would affect 70% of Europe’s largest cities, 19 cities in Africa and 78 million people living in China. However, a 0.5-metre change in sea level is just a quarter of the PNAS projection for 2100. Its upward revision of sea-level rise is significant, according to Eugenie Molyneux, chief risk officer for commercial insurance at Zurich. Many companies and their risk managers are likely to be making assessments and plans based on a sea-level rise below the likely threat, she told CRE. Upwards adjustments are also important because the consequences of each increase are not linear, explained Ms Molyneux. “As global sea levels rise, the impact is exponential. A half-metre rise will create issues for transport and communications in some areas, also crops and drinking water, but once you hit a certain point, migration levels too,” she said. “Expect higher sea levels sooner – it’s not a matter of preparing for 2050 or 2100. It is clear from research that estimates of future sea-level rises contain significant uncertainty and that companies should work to multiple scenarios, as well as build a climate change resilience strategy,” said Ms Molyneux. The threat of sea-level increases might be perceived as a risk for the future, but there is an urgency for businesses to act now, she continued. “This is an issue that companies and risk managers should be thinking about now. Some companies are taking action, but generally we see a lag between forecasts and action,” said Ms Molyneux. “There should be a sense of urgency. Companies are making decisions today for the long term, such as where to invest in plant and equipment, or establish supply chains. When making such plans, companies need to consider future sea levels,” she said. Zurich is already seeing an increase in the number of customers looking to include climate change factors in risk assessments. Large multinational companies are increasingly asking insurers to model existing and proposed property exposures for future climate conditions, as well as carry out onsite risk engineering surveys. “My advice is to make climate change a specific part of your strategy. Risk managers should encourage climate change total risk profiling and bring the risks of climate change front and centre to the board,” said Ms Molyneux. Environmental, social and governance (ESG) risks and reporting continue to rise up the corporate agenda, as a group of 88 global investors has accused more than 700 companies with $15.3trn market capitalisation of not adequately disclosing their environmental impact.

Risk managers urgently need to pay attention to rising sea levels

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