Impacts of climate change on human health and human settlements. Impacts of climate change on energy, industrial, insurance and other financial services

1. Climate sensitive health impacts

Certain groups have higher susceptibility to climate-sensitive health impacts owing to their age (children and elderly), gender (particularly pregnant women), social marginalization (associated in some areas with indigenous populations, poverty or migration status), or other health conditions like HIV. The socioeconomic costs of health problems caused by climate change are considerable.

2. Infectious diseases

Infectious diseases, including water-borne ones, are highly sensitive to climate conditions. A main concern in both developed and developing countries was the increase in and increased geographical spread of diarrhoeal diseases, the report found.

3. Expansion of geographical range of diseases

Climate change lengthens the transmission season and expands the geographical range of many diseases like malaria and dengue. For example, the conditions for dengue transmission are likely to expand significantly across the globe.

4. New and emerging health issues

Climate change will bring new and emerging health issues, including heat waves and other extreme events. Heat stress can make working conditions unbearable and increase the risk of cardiovascular, respiratory and renal diseases. Additionally, it is estimated that 22.5 million people are displaced annually by climate or weather-related disasters, and these figures are expected to increase in the future. Climate-induced human mobility has a socioeconomic cost and can affect mental and physical health.

5. Malnutrition and under nutrition

Malnutrition and under nutrition were highlighted as a concern for a number of developing countries in Africa, Asia and Latin America, which discussed the impacts of climate change on food security, particularly in relation to floods and drought.

The report highlights inspiring examples of adaptation solutions for health worldwide:

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The Climate Adaptation Management and Innovation Initiative of the Word Food Programme develops climate-induced food insecurity analyses and practices to inform programming and decision-making. The initiative focuses on 16 countries across Asia, the Middle East, and Eastern, Central and Northern Africa.

In France, the Tiger Mosquito Surveillance Network monitors the tiger mosquito’s movements.

The Smart Health Facilities Initiative and Smart Hospitals Toolkit is being implemented through the Pan American Health Organization in the Caribbean with the aim of supporting the governments of the selected countries to assess and prioritize vulnerability reduction investments in their health facilities.

Some countries integrate health into their national adaptation plans (NAPs) and programmes. For example, Macedonia and six additional countries are part of an initiative of WHO and the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety that brings health into adaptation plans.

There are also a number of training and awareness-raising activities, including the Self-Learning Course on Climate Change and Health, developed by Mexico’s National Institute of Public Health in line with the joint Pan American Health Organization/WHO Strategy and Plan for Action on Climate Change. The training aims at raising awareness and improving knowledge on the health effects of climate change among the general public and other sectors.

To help scale up adaptation action in countries in the area of human health, various solutions have been proposed in the report that require actions by the UN and partners.

Climate change has brought about possibly permanent alterations to Earth's geological, biological and ecological systems. These changes have led to the emergence of a not so large-scale environmental hazards to human health, such as extreme weather, ozone depletion, increased danger of wildland fires, loss of biodiversity, stresses to food-producing systems and the global spread of infectious diseases. In addition, climatic changes are estimated to cause over 150,000 deaths annually.

To date, a neglected aspect of the climate change debate, much less research has been conducted on the impacts of climate change on health, food supply, economic growth, migration, security, societal change, and public goods, such as drinking water, than on the geophysical changes related to global warming. Human impacts can be both negative and positive. Climatic changes in Siberia, for instance, are expected to improve food production and local economic activity, at least in the short to medium term. Whereas, Bangladesh has experienced an increase in climate-sensitive diseases such as malaria, dengue, childhood diarrhoea, and pneumonia, among vulnerable communities. Numerous studies suggest, however, that the current and future impacts of climate change on human society are and will continue to be overwhelmingly negative.

The majority of the adverse effects of climate change are experienced by poor and low-income communities around the world, who have much higher levels of vulnerability to environmental determinants of health, wealth and other factors, and much lower levels of capacity available for coping with environmental change. A report on the global human impact of climate change published by the Global Humanitarian Forum in 2009, estimated more than 300,000 deaths and about $125 billion in economic losses each year, and indicating that most climate change induced mortality is due to worsening floods and droughts in developing countries.

Over 90 percent of malaria and diarrhea deaths are borne by children aged 5 years or younger, mostly in developing countries.

Case study

One country that has seen significant impacts from dengue is Bangladesh. Dengue has been endemic in Bangladesh since its first major outbreak in 2000. With its high population, shifting weather patterns, and low and flat geography that is only one meter above sea level, Bangladesh is also one of the world’s most vulnerable countries when it comes to climate change. Climate change is predicted to increase temperatures and precipitation, both of which affect dengue transmission, as dengue is weather dependent, and most often occurs in wetter and warmer climates. Standing water allows habitats and breeding grounds for the mosquito vector, while warmer temperatures assist in larval development, replication of the virus, and period of infectivity. Studies have found lag effects of, on average, two months between high temperatures and dengue transmission, indicating the time that has lapsed between observed weather changes and new observed dengue cases.

Dhaka is Bangladesh's biggest city, and also the highest risk area in Bangladesh for transmission of dengue, with its topical climate and population of approximately 11.8 million people. The annual average temperature in Dhaka is 25°C and almost all of the average rainfall occurs during May through September. If higher temperature and increased precipitation continue, we could see temperatures increase and the rainy season extended, leading to an increased transmission period for dengue.

There were 25,059 cases of dengue in Dhaka from 2000 to 2010, with an average of 168 cases a month. While dengue testing is frequently performed in the private health care setting; it is frequently underperformed in the public health care setting, due to lack of testing accessibility. This indicates that there are potentially more cases of dengue than are getting diagnosed or reported.

Dengue incidence has only increased in the last few decades, and is projected to continue to do so with changing climate conditions. There have been prediction models of temperature created to project the effects of global warming on the planet. Based on these, the Intergovernmental Panel on Climate Change estimates that the mean annual temperature of Southeast Asia will have increased by 3.3 degrees Celsius by 2100, assuming no other changes. Taking this estimate, researchers predict an increase of 16,030 cases in Dhaka, Bangladesh by the year 2100. This represents a 40-times increase in dengue incidence.

Increased public health surveillance and preparation is needed in areas like Bangladesh that are seeing an upward trend in climatic changes and vector-borne disease like dengue virus.

Non-climatic determinants

Sociodemographic factors include, but are not limited to: patterns of human migration and travel, effectiveness of public health and medical infrastructure in controlling and treating disease, the extent of anti-malarial drug resistance and the underlying health status of the population at hand. Environmental factors include: changes in land-use (e.g. deforestation), expansion of agricultural and water development projects (which tend to increase mosquito breeding habitat), and the overall trend towards urbanization (i.e. increased concentration of human hosts). Patz and Olson argue that these changes in landscape can alter local weather more than long term climate change. For example, the deforestation and cultivation of natural swamps in the African highlands has created conditions favourable for the survival of mosquito larvae, and has, in part, led to the increasing incidence of malaria. The effects of these non-climatic factors complicate things and make a direct causal relationship between climate change and malaria difficult to confirm. It is highly unlikely that climate exerts an isolated effect.

Displacement and migration

Climate change causes displacement of people in several ways, the most obvious—and dramatic—being through the increased number and severity of weather-related disasters which destroy homes and habitats causing people to seek shelter or livelihoods elsewhere. Effects of climate change such as desertification and rising sea levels gradually erode livelihood and force communities to abandon traditional homelands for more accommodating environments. This is currently happening in areas of Africa’s Sahel, the semi-arid belt that spans the continent just below its northern deserts. Deteriorating environments triggered by climate change can also lead to increased conflict over resources which in turn can displace people.

The IPCC has estimated that 150 million environmental migrants will exist by the year 2050, due mainly to the effects of coastal flooding, shoreline erosion and agricultural disruption. However, the IPCC also cautions that it is extremely difficult to measure the extent of environmental migration due to the complexity of the issue and a lack of data.

According to the Internal Displacement Monitoring Centre, more than 42 million people were displaced in Asia and the Pacific during 2010 and 2011, more than twice the population of Sri Lanka. This figure includes those displaced by storms, floods, and heat and cold waves. Still others were displaced by drought and sea-level rise. Most of those compelled to leave their homes eventually returned when conditions improved, but an undetermined number became migrants, usually within their country, but also across national borders.

Asia and the Pacific is the global area most prone to natural disasters, both in terms of the absolute number of disasters and of populations affected. It is highly exposed to climate impacts, and is home to highly vulnerable population groups, who are disproportionately poor and marginalized. A recent Asian Development Bank report highlights “environmental hot spots” that are particular risk of flooding, cyclones, typhoons, and water stress.   

Some Pacific Ocean island nations, such as Tuvalu, Kiribati, and the Maldives, are considering the eventual possibility of evacuation, as flood defense may become economically unrealistic. Tuvalu already has an ad hoc agreement with New Zealand to allow phased relocation. However, for some islanders relocation is not an option. They are not willing to leave their homes, land and families. Some simply don’t know the threat that climate change has on their island and this is mainly down to the lack of awareness that climate change even exists. In Vutia on Viti Levu, Fiji’s main island, half the respondents to a survey had not heard of climate change. Even where there is awareness many believe that it is a problem caused by developed countries and should therefore be solved by developed countries.

Governments have considered various approaches to reduce migration compelled by environmental conditions in at-risk communities, including programs of social protection, livelihoods development, basic urban infrastructure development, and disaster risk management. Some experts even support migration as an appropriate way for people to cope with environmental changes. However, this is controversial because migrants – particularly low-skilled ones – are among the most vulnerable people in society and are often denied basic protections and access to services.

Climate change is only one factor that may contribute to a household's decision to migrate; other factors may include poverty, population growth or employment options. For this reason, it is difficult to classify environmental migrants as actual "refugees" as legally defined by the UNHCR. Neither the UN Framework Convention on Climate Change nor its Kyoto Protocol, an international agreement on climate change, includes any provisions concerning specific assistance or protection for those who will be directly affected by climate change.

In small islands and megadeltas, inundation as a result of sea level rise is expected to threaten vital infrastructure and human settlements. This could lead to issues of statelessness for populations in countries such as the Maldives and Tuvalu and homelessness in countries with low-lying areas such as Bangladesh.

The World Bank predicts that a “severe hit” will spur conflict and migration across the Middle East, Central Asia, and Africa.

·         War in Darfur, where sustained drought encouraged conflict between herders and farmers

·         Syrian Civil War, preceded by the displacement of 1.5 million people due to drought-induced crop and livestock failure

·         Islamist insurgency in Nigeria, which exploited natural resource shortages to fuel anti-government sentiment

·         Somali Civil War, in which droughts and extreme high temperatures have been linked to violence

Additionally, researchers studying ancient climate patterns (paleoclimatology) have shown that long-term fluctuations of war frequency and population changes have followed cycles of temperature change since the preindustrial era. A 2016 study finds that "drought can contribute to sustaining conflict, especially for agriculturally dependent groups and politically excluded groups in very poor countries. These results suggest a reciprocal nature–society interaction in which violent conflict and environmental shock constitute a vicious circle, each phenomenon increasing the group’s vulnerability to the other."

Social impacts

The consequences of climate change and poverty are not distributed uniformly within communities. Individual and social factors such as gender, age, education, ethnicity, geography and language lead to differential vulnerability and capacity to adapt to the effects of climate change. Climate change effects such as hunger, poverty and diseases like diarrhea and malaria, disproportionately impact children; about 90 percent of malaria and diarrhea deaths are among young children. Children are also 14–44 percent more likely to die from environmental factors, again leaving them the most vulnerable. Those in urban areas will be affected by lower air quality and overcrowding, and will struggle the most to better their situation.

Social effects of extreme weather

As the World Meteorological Organization explains, "recent increase in societal impact from tropical cyclones has largely been caused by rising concentrations of population and infrastructure in coastal regions.

 The American Insurance Journal predicted that "catastrophe losses should be expected to double roughly every 10 years because of increases in construction costs, increases in the number of structures and changes in their characteristics." The Association of British Insurers has stated that limiting carbon emissions would avoid 80% of the projected additional annual cost of tropical cyclones by the 2080s. The cost is also increasing partly because of building in exposed areas such as coasts and floodplains. The ABI claims that reduction of the vulnerability to some inevitable effects of climate change, for example through more resilient buildings and improved flood defences, could also result in considerable cost-savings in the longterm.

Human settlement

A major challenge for human settlements is sea level rise, indicated by ongoing observation and research of rapid declines in ice-mass balance from both Greenland and Antarctica. Estimates for 2100 are at least twice as large as previously estimated by IPCC AR4, with an upper limit of about two meters. Depending on regional changes, increased precipitation patterns can cause more flooding or extended drought stresses water resources.

Coasts and low-lying areas

For historical reasons to do with trade, many of the world's largest and most prosperous cities are on the coast. In developing countries, the poorest often live on floodplains, because it is the only available space, or fertile agricultural land. These settlements often lack infrastructure such as dyke=s and early warning systems. Poorer communities also tend to lack the insurance, savings, or access to credit needed to recover from disasters.

The effects of sea level rise:

The IPCC reported that socioeconomic impacts of climate change in coastal and low-lying areas would be overwhelmingly adverse. The following impacts were projected

·         Coastal and low-lying areas would be exposed to increasing risks including coastal erosion due to climate change and sea level rise.

·         By the 2080s, millions of people would experience floods every year due to sea level rise. The numbers affected were projected to be largest in the densely populated and low-lying mega-deltas of Asia and Africa; and smaller islands were judged to be especially vulnerable.

634 million people live in coastal areas within 30 feet (9.1 m) of sea level. About two thirds of the world's cities with over five million people are located in low-lying coastal areas.

Energy sector

Oil, coal and natural gas

Oil and natural gas infrastructure is vulnerable to the effects of climate change and the increased risk of disasters such as storm, cyclones, flooding and long-term increases in sea level. Minimizing these risks by building in less disaster prone areas, can be expensive and it is impossible in countries with coastal locations or island states. All thermal power stations depend on water to cool them. Not only is there increased demand for fresh water, but climate change can increase the likelihood of drought and fresh water shortages. Another impact for thermal power plants, is that increasing the temperatures in which they operate reduces their efficiency and hence their output. The source of oil often comes from areas prone to high natural disaster risks; such as tropical storms, hurricanes, cyclones, and floods. An example is Hurricane Katrina's impact on oil extraction in the Gulf of Mexico, as it destroyed 126 oil and gas platforms and damaged 183 more.

However, previously pristine arctic areas will now be available for resource extraction.

Nuclear

Climate change, along with extreme weather and natural disasters can affect nuclear power plants in a similar way to those using oil, coal, and natural gas. However, the impact of water shortages on nuclear power plants cooled by rivers will be greater than on other thermal power plants. This is because old reactor designs with water-cooled cores must run at lower internal temperatures and thus, paradoxically, must dump more heat to the environment to produce a given amount of electricity. This situation has forced some nuclear reactors to be shut down and will do so again unless the cooling systems of these plants are enhanced to provide more capacity. Nuclear power supply was diminished by low river flow rates and droughts, which meant rivers had reached the maximum temperatures for cooling. Such shutdowns happened in France during the 2003 and 2006 heat waves. During the heat waves, 17 reactors had to limit output or shut down. 77% of French electricity is produced by nuclear power; and in 2009 a similar situation created a 8GW shortage, and forced the French government to import electricity. Other cases have been reported from Germany, where extreme temperatures have reduced nuclear power production 9 times due to high temperatures between 1979 and 2007. In particular:

·         The Unterweser nuclear power plant reduced output by 90% between June and September 2003.

·         The Isar nuclear power plant cut production by 60% for 14 days due to excess river temperatures and low stream flow in the river Isar in 2006.

Similar events have happened elsewhere in Europe during those same hot summers. Many scientists agree that if global warming continues, this disruption is likely to increase.

Hydroelectricity

Changes in the amount of river flow will correlate with the amount of energy produced by a dam. Lower river flows because of drought, climate change, or upstream dams and diversions, will reduce the amount of live storage in a reservoir; therefore reducing the amount of water that can be used for hydroelectricity. The result of diminished river flow can be a power shortage in areas that depend heavily on hydroelectric power. The risk of flow shortage may increase as a result of climate change. Studies from the Colorado River in the United States suggests that modest climate changes (such as a 2 degree change in Celsius that could result in a 10% decline in precipitation), might reduce river run-off by up to 40%.

Brazil in particular, is vulnerable due to its having reliance on hydroelectricity as increasing temperatures, lower water flow, and alterations in the rainfall regime, could reduce total energy production by 7% annually by the end of the century.

Insurance

An industry directly affected by the risks of climate change is the insurance industry. According to a 2005 report from the Association of British Insurers, limiting carbon emissions could avoid 80% of the projected additional annual cost of tropical cyclones by the 2080s. A June 2004 report by the Association of British Insurers declared "Climate change is not a remote issue for future generations to deal with; it is, in various forms here already, impacting on insurers' businesses now." The report noted that weather-related risks for households and property were already increasing by 2–4% per year due to the changing weather conditions, and claims for storm and flood damages in the UK had doubled to over £6 billion over the period from 1998–2003 compared to the previous five years. The results are rising insurance premiums, and the risk that in some areas flood insurance will become unaffordable for those in the lower income brackets.

Financial institutions, including the world's two largest insurance companies: Munich Re and Swiss Re, warned in a 2002 study that "the increasing frequency of severe climatic events, coupled with social trends could cost almost 150 billion US$ each year in the next decade." These costs would burden customers, taxpayers, and the insurance industry, with increased costs related to insurance and disaster relief.

In the United States, insurance losses have also greatly increased. It has been shown that a 1% climb in annual precipitation can increase catastrophe loss by as much as 2.8%. Gross increases are mostly attributed to increased population and property values in vulnerable coastal areas; though there was also an increase in frequency of weather-related events like heavy rainfalls since the 1950s.

Transport

Roads, airport runways, railway lines and pipelines, (including oil pipelines, sewers, water mains etc.) may require increased maintenance and renewal as they become subject to greater temperature variation. Regions already adversely affected include areas of permafrost, which are subject to high levels of subsidence, resulting in buckling roads, sunken foundations, and severely cracked runways

How does climate change affect the insurance sector? a geneva association conference

In December 2015, 195 countries adopted the first-ever universal, legally binding global climate deal at the COP21 conference in Paris.

This deal recognizes the potential role of the (re)insurance sector in terms of supporting climate change mitigation and adaptation. In its latest report, based on a conference co-organized with the Organisation for Economic Co-operation and Development (OECD), the Geneva Association highlights three critical areas in which the (re)insurance industry will have a direct impact on climate change action.

 

Managing the financial risks of extreme events in a changing climate

(Re)insurance and capital markets play a critical role in the financial management of disaster risks, absorbing the costs of damage and losses and supporting post-disaster economic recovery by providing a source of funds for recovery and reconstruction. Countries with mature insurance markets recover much faster and more efficiently when struck by a disaster. When properly designed, insurance can also contribute to adaptation by reducing the overall losses from climate change-related extreme events. The insurance sector can also play a strong advocacy role in encouraging preventive measures, such as land-use policies and building codes that improve resilience against the impacts of disaster events.

Investing in the transition to a low-carbon economy.

As institutional investors, the (re)insurance sector could support the transition to a low-carbon economy by allocating investments into assets that reduce greenhouse gas emissions (e.g. renewable energy power generation, energy efficiency).

 

·         Is there a role for regulators in addressing climate risks?

Climate change has implications for insurance companies on both sides of the balance sheet. Potential changes to the nature of disaster risks or the regulatory environment for greenhouse gas-producing sectors could have significant impacts on the financial soundness of insurance companies.

 

Denis Kessler: “Reinsurers have developed knowledge in terms of risk management and disaster risk reduction”

Speaking at the end of the conference, Denis Kessler, Chairman and CEO of SCOR SE, made a special address. He stressed the fact that “It is in the interest of the insurance sector to mitigate the impacts of climate change and it is in the interest of the population to ensure that the insurance sector has the capacity to support the population.” Insurance should be used “not only as a means for providing financial resilience, but as an instrument for supporting risk reduction”, thanks notably to “the knowledge reinsurers have developed in terms of risk management and disaster risk reduction”. 

 

“Insurers and reinsurers are also important investors and should be encouraged to invest in low-carbon assets and divest from assets that are contributing to global warming”, said Kessler, going on to add that “the sector does not need regulation to make this transition”. Speaking about regulation, he considered that “a stable regulatory and policy environment is also key to encouraging long-term investment. […]Insurers are already facing increased natural disaster risk, why should they also face regulatory risks?”

Finally, he acknowledged that “no stakeholder will be able to solve these challenges alone. The public and private sectors need to unite their efforts. Science and technology need to be supported in order to find innovative ways to address climate risks. Insurance and reinsurance sectors have a wealth of data, forward-looking modelling capacities, and exposure data that needs to be shared to help understand climate risks.”

 

The Geneva Association

The Geneva Association is the leading international insurance think tank for strategically important insurance and risk management issues. Its membership comprises a statutory maximum of 90 chief executive officers (CEOs) from the world’s top insurance and reinsurance companies. It organises international expert networks and manages discussion platforms for senior insurance executives and specialists as well as policy-makers, regulators and multilateral organisations.

          Financial services businesses will be increasingly required to consider the risks and opportunities arising from climate change.

The role of the financial services industry

 Market solutions will play a pivotal role in tackling climate change whatever the international policy framework. Financial institutions will therefore have a key role to play. They can help to structure and monitor an efficient market system by working with securities and exchange regulators, actuaries, accountants and others. This applies particularly to providing the elements of an efficient emissions trading system (i.e., a standardized ‘‘commodity’’; standardized trade characteristics including monitoring, verification and certification requirements; organized exchanges; clear market prices; adequate supply). More generally they can provide products and services that contribute towards ‘‘adaptation’’ and ‘‘mitigation’’ efforts (such as trading, banking and insurance for carbon credits; project finance for ‘‘low-carbon’’ energy (e.g., renewables); weather derivatives; catastrophe bonds; micro-finance). Financial institutions are major businesses with a significant impact on the environment themselves, th=====rough energy use, transportation, and office occupation and indirectly through their relationships with consumers and other businesses. They must practise what they preach by managing their own property risk from extreme weather events, pursuing environmental management leadership in areas such as water consumption, recycling and energy efficiency within their own property portfolio (including tenants), and engaging with stakeholders to work towards solutions on the climate change issue.

Most mainstream financial institutions are either unaware of the business relevance of climate change or have adopted a wait and see attitude. A few companies, however, have actually developed and operationalized strategies.

Insurance and reinsurance

The view that climate change is of strategic business importance is more prevalent among insurance and reinsurance companies than perhaps any other segment of the financial services industry. However, their polices and strategies vary considerably according to geographic location and line of business. For example, very few insurers have factored in climate change-related risks into underwriting premiums and deductibles, although reinsurers have initiated qualitative sector-level impact analyses and the U.K. industry has been particularly active on flood risk.

Commercial banking

In the commercial banking industry, there are widespread pockets of climate change expertise but awareness of the issue by senior executives appears to be low. The key area of concern for these companies is the extent to which climate change and GHG mitigation regulations will affect lending decisions and credit risk management policies. Opportunities are being seized by some commercial banks; for example, in GHG credit trading and energy efficient loans.

Asset management

For most mainstream asset managers, climate change is not currently understood as an investment risk issue, although a handful have developed new products and new areas of expertise relating to the GHG markets. For those asset managers and pension funds aware of the issue, engagement with affected companies is the preferred course of action, rather than disinvestment. Among socially-responsible fund managers, climate change is used as a screening criterion, but the screens used tend to be very crude.

Project finance

Several project finance and venture capital funds have been launched or announced in the past two years focusing on clean technology and/or carbon finance. At present, however, they are attracting mainly strategic corporate investors rather than institutional investors. The latter generally consider these funds to be too small and inefficient to generate adequate returns and there is limited awareness in mainstream project finance circles of the potential for GHG-related risks and opportunities to affect project economics.

Emissions trading markets

The formation of regional emissions trading schemes and various GHG exchanges will soon make emissions trading a reality. However, these markets are still under development and their commercial appeal for financial institutions is not yet clear.

Professional services

In general, advisors to the financial sector do not appear aware of the implications of climate change to the industry. However, efforts are underway by accounting professionals to develop standardized accounting tools to deal with GHG-related assets and liabilities. Some have also started to inform and educate their corporate clients on potential carbon-related risks. Credit rating agencies, too, are examining how these issues affect the companies they monitor and are exploring new business opportunities in this area.

The way ahead for the insurance industry There can be no standard answer to meeting the new challenges posed by climate change, because of the great diversity in national insurance systems. Climate change was discussed at the annual roundtable of The Geneva Association, a forum of the 80 largest insurers in the world, in June 2001 (Harvey, 2002).

Catastrophe bonds offer an innovative new market that can potentially offer several advantages: they extend beyond the usual one-year insurance contract, they provide additional diversification to investment portfolios, allow reinsurance firms to raise funds from outside conventional sources, and may even enable insurance companies to expand the limits of insurability by providing more capacity. However, the market is currently highly illiquid (somewhere in the region of 40 CAT bonds have been issued to date) and has been hampered by high transaction costs, inconsistent analyses, and the fear of the unknown as far as investors are concerned.

Climate change will result in more variable weather as well as extreme events. This will give impetus to the market for weather derivatives contracts as a financial tool for hedging non-catastrophic climate-related risks and may allow traditional insurance tools to be extended into new territory. So far, insurers have been reluctant to participate, since it is not based on contracts of indemnity and the activity has centred on trading between energy companies, but in fact many sectors are exposed to commercial risk from weather variations, and there are conventional insurance products which are not based on indemnity either. Insurance firms also have an opportunity to develop new risk management tools and services tailored specifically to good energy and climate policy management. For example, insurance services geared towards cleaner energy and carbon sequestration projects of the Kyoto mechanisms would be certain to improve the viability of clean development mechanism (‘‘CDM’’) and joint implementation (‘‘JI’’) projects and make them more attractive and secure for the project finance community. Going beyond underwriting, as outlined earlier, there are a range of actions that can help to prevent climate change. By improving their environmental management internally, and by ensuring that their investments support climate-friendly activity, insurance firms can play a part in slowing the process of climate change. In particular, they can press advisors to develop new quantitative tools to assess the potential implications of climate change and GHG regulations on the equity market, extend their dialogue with industrial companies to promote action on climate change-related issues, and seek prudent ways to participate in the market for clean technologies and low GHG-intensity products and services.

The most active companies also lobby policymakers at the international level, through bodies like the UNEP Financial Institutions Initiatives and the World Business Council for Sustainable Development, for the adoption of a long-term political framework like ‘‘Contraction and Convergence’’ to succeed the Kyoto Protocol. Several insurers were members of the work group which commissioned the UNEPFI study reviewed in this article. It would send a strong message to policymakers and other stakeholders, if the three projects which it recommended were supported enthusiastically and produced top-quality results.

Climate change impacts on African human settlements arise from a number of climate change-related causes, notably sea level changes, impacts on water resources, extreme weather events, food security, increased health risks from vector home diseases, and temperature-related morbidity in urban environments.

Some coastlines and river deltas of Africa have densely populated low-lying areas, which would be affected by a rise in sea level. Other coastal settlements will be subjected to increased coastal erosion. Recent flooding in East Africa highlighted the vulnerability of flood plain settlements and the need to develop adaptive strategies for extreme weather events management and mitigation. In the semi arid and arid zones many settlements are associated with inland drainage water sources. Increases in drought will enhance water supply related vulnerabilities. Inter-basin and international water transfers raise the need for adequate legal frameworks that ensure equity among participating nations.

Similarly, water supply and irrigation reservoirs in seasonal river catchments might fail, leading to poor sanitation in urban areas as well as food shortage. Hydroelectric power generation could be restricted in drought periods, and where it is a major contributor to the energy budget, reduced power generation could lead to a multiplicity of other impacts. States are advised to develop other sources of renewable energy.

Temperature changes will lead to altered distribution of disease vectors such as mosquitoes, making settlements currently free of vector borne diseases vulnerable. Rapid breeding of the housefly could create a menace associated with enteric disorders, especially in conditions of poor sanitation.

The dry savannahs of Africa are projected as possible future food deficit areas. Recurrent crop failures would lead to transmigration into urban areas. Pastoralists are likely to undertake more trans-boundary migrations and probably come into conflict with settled communities.

Adaptive measures will involve methods of coastal defences (where applicable), a critical review of the energy sector, both regionally and nationally, a rigorous adherence to city hygiene procedures, an informed agricultural industry that is capable of adapting to changing climate in terms of cropping strategies, and innovations in environment design to maximise human comfort at minimum energy expenditure. In the savannah and arid areas water resource management systems will be needed to optimise water resource use and interstate co-operation where such resources are shared.

Climate change issues discussed here raise the need for state support for more research and education in impacts of climate change on human settlements in Africa.