• There is new, robust evidence that the global oceans have warmed
significantly. Given that energy from the ocean isthe key driver of extreme
events, ocean warming has effectively caused a shift towards a “new normal”
for a number of insurance-relevant hazards. Thisshift is quasi irreversible—
even if greenhouse gas(GHG) emissions completely stop tomorrow, oceanic
temperatures will continue to rise.
• In the non-stationary environment caused by ocean warming, traditional
approaches, which are solely based on analysing historical data, increasingly
fail to estimate today’s hazard probabilities.Aparadigmshiftfromhistoric to
predictive risk assessment methodsis necessary.
• Due to the limits of predictability and scientific understanding of extreme
eventsin a non-stationary environment, today’slikelihood of extreme events
is ambiguous. As a consequence, scenario-based approaches and tail risk
modelling become an essential part of enterprise risk management.
• In some high-risk areas, ocean warming and climate change threaten the
insurability of catastrophe risk more generally. To avoid market failure, the
coupling of risk transfer and risk mitigation becomes essential.
Warming of the Oceans and Implications for the (Re)insurance Industry