Of the top ten cities around the world that are currently sinking, due to the rising sea level, Jakarta tops the list. According to RMS director, model product management Mr Hemant Nagpal, the world can expect sea levels to rise three to ten millimetres a year, caused by unchecked climate change.
Speaking at the Asia NatCAT and Climate Change Conference yesterday morning, he said: “If you're looking at the different components of sea level almost 40% of that is coming from the melting the polar ice caps, which we are aware of. What you may not be aware of is that about 50% of that is due to just thermal expansion – the increase in global temperatures causes the oceans to expand and that would lead to the increase of sea levels by 10%.”
Combined with land subsidence and unpredictable precipitation, this causes people to use more groundwater. “That’s not a good place to be, from a (re)insurance perspective, but also from a city perspective,” he said.
Other Asian cities that are currently facing a sinking risk are Ho Chi Minh City, Bangkok and Manila. Japan, in the mid-1960s, suffered a subsidence of more than four meters, which was solved by the government stopping groundwater extraction for ten years. The land in Japan bounced back in 1975.
He also pointed out that skyscrapers also contribute to subsidence, simply due to their massive weight.
The Indonesian insurance regulator, OJK, also called for greater action from the insurance industry in battling climate change. “Someone needs to take account of climate risk, as floods and hurricanes would be catastrophic for the insurance industry,” said OJK’s department head of non-bank financial industry supervision Mr Heru Juwanto, during his keynote address yesterday morning.
He mentioned four impacts that have already been seen amongst the Indonesian insurance industry already – sustainability, premium rate pricings, financial reserves and opportunities. While he mentioned that climate risk has a negative impact on the sustainability and financial reserves of an insurer, and add more unpredictability to pricing, it also presents itself as a strong opportunity for the industry.
“Climate change obviously creates risk and loss for the insurance industry. But on the other side, it creates the need for new products,” he added.
The Asia NatCAT and Climate Change Conference is organised by Asia Insurance Review.