-Caveat Lector- Global Warming Makes Things Hot for Insurers <http://www.iht.com/articles/13668.htm> by Sharon Reier Saturday, March 17, 2001 In the summer of 1999, West Nile virus made its debut in New York City, killing seven residents and seriously infecting dozens more. Although researchers had hoped the virus would not survive the winter months, by March they found that the kind of hibernating mosquitoes most likely responsible for carrying the sickness still harbored the infection. By the following year the virus had spread to New Jersey, Connecticut, Rhode Island and Massachusetts. The outbreak is a result of two forces: easy global travel - the mosquitoes that carry the virus most likely arrived on a trans-Atlantic flight - and the effects of global warming. According to Raymond Hayes, assistant dean of medical education at Howard University in Washington: "Various infectious diseases are appearing in greater frequency as temperatures are elevated. Insect-transmitted diseases such as dengue fever, including the hemorrhaging form, malaria, Rift Valley fever, onchocerciasis and Lyme disease are enhanced by warm weather." He also noted that similar correlations with elevated temperatures have been observed with waterborne diseases, especially cholera. Although industrial countries have more resources to counteract these problems than do developing ones, the Nile Fever incident shows that they cannot completely contain them. Scientists do not like to indulge in phrases like environmental disaster. But substitute "extreme environmental incident" for "disaster" and you have a whole different story. The spread of West Nile virus is among the "extreme environmental incidents" catalogued by the Global Warming International Center, a group based in Naperville, Illinois, that disseminates information on global warming science and policy. Sinyan Shen, the physicist who directs the center, compiles an annual extreme-event index that tracks environmental anomalies and their economic impact. Among the extreme events included for the year 2000: the coldest winter in Mongolia in three decades after a severe summer drought resulting in the death of 1.8 million herd animals; 11 cases of Marburg fever, a deadly hemorrhage-causing disease closely related to the Ebola virus; the worst drought in 100 years in India, Pakistan and Afghanistan; a deadly series of tornadoes, high winds and torrential rains in the U.S. Midwest, which did not save it from severe drought conditions linked to the La Nina phenomenon, and the destruction of some 6.6 million acres (2.7 million hectares) by forest fires in the Western United States due to extreme weather and lightning. These incidents affect different regions in different ways, concluded Anthony Janetos, a senior vice president at the World Resources Institute, a Washington research organization that specializes in environmental issues. Mr. Janetos was a participant in the UN Intergovernmental Panel on Climate Change, which issued a major alarm about climate change in early March. For instance, in the United States "there are regional problems," said Mr. Janetos. "So although the national picture is reasonable, the best science indicates increases in the frequency of both droughts and heavy rains." That could heavily impact farmers in the Dakotas, for instance, whose crops are dependent on heavy winter snow conditions and predictable seasonal rains. Increasingly turbulent climate conditions are being taken seriously by large insurers and reinsurers, which fear burgeoning losses should disasters strike highly populated areas. At Swiss Reinsurance Co., Gerry Lemcke, the company's climate and natural hazard specialist, noted that while "there have been strong, strong catastrophes in all ages, what we see clearly is that changing in global climate warming would change the velocity of events. Extremes get more extreme and the frequency changes. An extreme we used to see once every 10 years, we now see every six years or eight years." There are also particular regional problems. Take a little-known phenomenon called subsidence. Subsidence, as Mr. Lemcke described it, is the process whereby drought and warming shrink the clay that most of southeastern England and northern France is built on. "If the clay shrinks, it can damage all the structures on it," he commented. That in turn could devastate small regional insurance companies. In Britain the insurance industry is already experiencing a higher level of claims from subsidence, and there are fears that it will grow, according to Andrew Dlugolecki, a fellow at the climate research unit at the University of East Anglia. In Florida eight local insurers failed as a direct result of the $20 billion in damages caused by the 1992 hurricane designated Andrew. Larger national insurers survived, but many will no longer provide windstorm insurance. Rising sea levels also have local impacts. "If you expect a 50-centimeter sea level rise, a considerable amount of England, Netherlands, Scandinavia and the Caribbean will be flooded," added Mr. Lemcke. Mr. Lemcke observed that the insurance industry is adapting rather quickly. By comparison, companies that must make 10- or 20-year capital spending plans have less flexibility in the event of natural disasters. "If you build an industrial plant where you are relying on enough water to produce electricity and the climate changes, you may not have enough water to run your plant and the investment can be worthless." He also said that companies such as Swiss Re benefit from being global. On the liability side, he pointed out, "the important thing is if you look at a global level, the results balance out. You have winners and losers." But imagine a company that has all its property in, say, Wales. "If you have invested in a plant or a holiday resort there, then you may have to cope with many more storms with a higher frequency." On the investment side of the ledger, Swiss Re has fashioned an "Eco-portfolio," said Christopher Walker, an associate director at the company. Swiss Re has earmarked about 100 million Swiss francs ($59 million) to invest in funds that emphasize renewable resources. It has also undertaken a new initiative that will focus on renewable energy and encompass funds with projects that generate greenhouse gas emission reduction credits as part of their return. Among the firms with expertise in this area, said Mr. Walker, are Dexia-FondElec in Stamford, Connecticut, EIF Group's REEF Investment in Washington, and a new fund that is being started up at UBS AG called the Climate Value Fund. These funds are geared to institutional investors. There is a growing number of environmental funds available to individual investors. A Swiss-based fund, Pictet Global Sector Water Fund P, invests in companies that improve water supply and provide infrastructure for industrial water consumption. According to Standard Poor's Corp.'s Micropal unit, it was the top-performing offshore mutual fund for the last quarter of 2000, gaining 17.3 percent. -------------------- For more information: DEXIA-FONDELEC. Telephone: 1 203 326 4570. EIF Group's REEF Investment. Telephone: 1 202 783 4419. PICTET WATER FUND. Telephone: 41 22 781 00 70. Web site: http://www.pictet.com/en/services/mutual/netasset.html?Fund=001021902 The fund is not available to U.S. residents. To read a Money Report interview with Herve Gaudart, the portfolio manager, from April, see the Web page at www.iht.com/IHT/MONEY/042200/my042200e.html <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply. 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