CLIMATE CHANGE:
CHALLENGES AND OPPORTUNITIES FROM MUNICH
RE`S PERSPECTIVE
Madrid; 9 June 2010
Ernst Rauch
Head of Corporate Climate Centre
MOTIVATION
 Climate change
2
Climate Change is a fact
• Climate change is a fact, and it is man-made. It triggers severe natural disasters.
Their number has more than doubled since 1980
• Overall economic losses in the period since 1980 total $1,600 billion, an annual
increase of 11%.This rise is mainly the result of socio-economic factors.
The contribution from climate change is still being analysed
• We at Munich Re concern ourselves with these risks and regard the scientific
evidence as conclusive that we must combat climate change now.
© 2010 Munich Re, Geo Risks Research
3
Climate Change
Global mean temperature, 1850 - 2009
Departures in temperature from the 1961-1990 average
Temperature anomaly (°C)
2009: +0.44 °C
above the 1961-1990
annual average
(14°C)
The five warmest
years in decreasing
order are:
1998, 2005, 2003,
2002 and 2009.
Source: Hadobs Met Office, UK (as at February 2010)
© 2010 Munich Re, Geo Risks Research
4
NatCatSERVICE
Global natural catastrophes 1980 – 2009
Number of events with trend
1 200
1 000
Number
800
600
400
200
1980
1982
1984
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
1986
1988
1990
1992
1994
Meteorological events
(Storm)
© 2010 Munich Re, Geo Risks Research, NatCatSERVICE – As at January 2010
1996
1998
2000
Hydrological events
(Flood, mass movement)
2002
2004
2006
2008
Climatological events
(Extreme temperature,
drought, forest fire)
5
CLIMATE CHANGE:
 Munich Re`s strategic perspective
6
Climate Change: Impact on industry sectors
Deutsche Bank Research (2007)
© 2010 Munich Re, Geo Risks Research
7
Munich Re’s strategic approach to climate change
Risk assessment/
underwriting
New markets/
new products
Asset
management
Changed frequencies/
intensities of weather
hazards in underwriting
and risk management
Pathway to low-carbon,
hazard-adaptive
economies: new
business opportunities
Integration of
sustainability criteria into
investment strategies
Examples:
Examples:
Examples:
 Tropical cyclones,
El Niño/La Niña, …
 Covers for renewable
energies
 Investments acc. to
sustainability criteria
 Climate liability issues
 Micro insurance in
developing
economies
 Significant expansion of
renewable energy
investments
 Prospective risk
management
 Retail fund investing acc.
Dow Jones Sustainability
© 2010 Munich Re, Geo Risks Research
8
NEW MARKETS /
NEW PRODUCTS
Development of investments in renewable energies and
new technologies
Worldwide, 2005–2030*
US$bn
700
590**
600
502**
Investments
in 2020 Peak Scenario***
548 **
500
Investments
in Base Scenario
373**
400
264**
300
200
100
0
2005
2006
2007
2008
2010
2015
2020
2025
2030
Source: New Energy Finance 2009
* New investment in energy supplies including reinvestment, research and development costs and small-scale projects.
** Forecasts
*** 2020 Peak Scenario: annual CO2 emissions have to peak before 2020
**** Base Scenario: meet climate protection goals (limit global mean temperature increase to 2 degrees)
© 2010 Munich Re, Geo Risks Research
10
Investments in renewable energies (worldwide, 2008):
US$ 120bn*
By region (%)

Accounts for 10% of global energy
infrastructure spending

Europe invests most, followed by North
America
* Includes new investments from VC/PE, public markets, and
asset finance only. Excludes reinvestment adjustment.
By technologies (%)

Wind continued to attract the most
investment (US$ 53bn), mainly for new
capacity building

US$ 31bn of new investment went to solar
energy, which has grown at an average
annual rate of 70% since 2006, followed by
geothermal with a CAGR of 57%
Source: UNEP/SEFI/New Energy Investment 2009
© 2010 Munich Re, Geo Risks Research
11
New technologies – new business opportunities
„Wind and no
wind“ covers
Performance
cover
© 2010 Munich Re, Geo Risks Research
Exploration cover
for geothermal
drilling projects
Insurance for
hydro power
plants
All risks covers for
biomass power
plants
12
ASSET MANAGEMENT
Munich Re investments in renewable energies
Munich Re investment
in a solar plant
installed on a traffic
noise barrier in Bavaria
 power rating: 2.2 MW
 length: 750 meters
 cost: ~ 10 mn EUR
© 2010 Munich Re, Geo Risks Research
14
Munich Re investments in renewable energies
Statement Dr. Torsten Jeworrek, member of the board of management, Munich Re:
Losses caused by climate change will continue to increase in the future.
Jeworrek: "We need as soon as possible an agreement that significantly reduces
greenhouse gas emissions because the climate reacts slowly and what we fail to
do now will have a bearing for decades to come."
Consequently, Munich Re will now drive forward its own initiatives with even
greater commitment – investments of up to €2bn in renewable energy, for
instance, or the Desertec desert-power project. "We will do our utmost to
ensure that DII GmbH, the Desertec project planning entity, can put forward
finished plans in the next three years. Munich Re will, of course, also be involved
in their implementation – as an investor and insurer", Jeworrek added.
12 / 2010
15
DESERTEC:
 Munich Re as the initiator of the Dii GmbH
(“Desertec Industries”)
Dii GmbH („Desertec Industries“)
Munich Re as the initiator
The world‘s deserts receive in 6 hours the amount of energy, that mankind
consumes in a hole year.
solar collector
area necessary
to meet the
world‘s energy
demand
Source:
DESERTEC
Foundation
© 2010 Munich Re, Geo Risks Research
17
The realization of the Desertec concept makes it
possible to achieve a sustainable energy-mix in Europe by 2050
Background, aims and approach
Background
 Concept was developed by the Club of Rome and by the TREC Initiative (Transmediterranean Renewable Energy Cooperation)
 The German Centre for Aerospace (DLR) conducted several feasibility studies
Aims
 Energy supply in the EUMENA area (Europe, Middle East, North Africa) with a share
of at least 15% of renewable energy in Europe by 2050
 Comprehensive solution to the global problems of the future: Lack of energy, Water
scarcity, climate change and food shortage.
 Solar and wind power from the MENA-region as basic elements of the future energymix (scenario-analysis)
 Consideration of already existing and approved technologies
Approach
 Solar and wind power generators
 High-voltage direct-current transmission
Overall calculated investment needs are approximately 400 Billion € by 2050; in the
mid and long term grid parity has to be achieved.
© 2010 Munich Re, Geo Risks Research
18
Foundation of the Dii GmbH (“Desertec Industries”)
Milestones
07/13/09
 Joint signature for a memorandum of understanding
by 12 companies + DESERTEC Foundation
 Legal foundation of the planning company
(LLC)
10/30/09
 Definition of Dii’s governance structure
 Admission of new (international)
members
 Development of an implementable roadmap to „green energy generation“
in North Africa‘s deserts and in the Middle East
10/31/12
 In the long run 15% of Europe‘s energy consumption, as well as a major
share of the generating countries‘ energy demand, is supposed to be
supplied by the Desertec Project
© 2010 Munich Re, Geo Risks Research
19
Climate Change and CSR
Carbon neutrality at Munich Re: credibility as part of the holistic approach
Level 1: Emission reduction
Carbon credits as „principal objective“
Improvement of
Energy Efficiency
Purchase of Green
Electricity
Cabon credits as „by-product“
Investments in
Afforestation
Investments in
Renewable Energies
Level 2: Compensation of „remainig“ CO2 emissions
Purchase of CO2 credits – Investments in VER (verified emissions reduction) projects
Goal:
Munich Re headquarters (Munich): carbon neutral by 2009
Munich Re reinsurance group worldwide: carbon neutral by 2012
© 2010 Munich Re, Geo Risks Research
20
THANK YOU VERY MUCH
FOR YOUR ATTENTION
Ernst Rauch
Head of Corporate Climate Centre
Contact: CorporateClimateCentre@munichre.com
Homepage: www.munichre.com