12.6.2. Investment and Insurance
According to Pittock et al. (1999), based on Insurance Council of Australia
figures, major climatic catastrophe insurance losses from 1970 through 1996
averaged AU$208 million yr-1. Of these losses, nearly half were from tropical
cyclones; one-quarter were from hail. Other flooding and storm damage accounted
for most of the rest; losses from fire were less than 10% of the total. Figures
provided by the Insurance Council of New Zealand show that insurance industry
payouts for New Zealand climatic catastrophes averaged NZ$23.5 million yr-1
(inflation-adjusted) between 1980 and 1998.
In an Australian study of insurance and climate change, Leigh et al. (1998a)
examined four major climatic disasters: the Brisbane floods of 1974, the South
Australian bushfires of 1983, the Nyngan floods of 1990, and the New South Wales
bushfires of 1994. Total estimated damage from these four events was AU$178
million, $200-400 million, $47 million, and $168 million, respectively;
however, the insurance industry bore only 39, 31, 9, and 33% of the cost, respectively.
Government relief assistance was roughly equal to that from the insurance industry,
and about 70-90% of that was provided by the federal government.
Leigh et al. (1998b) have reported on the potential for adaptation to climate
change by the insurance industry in Australia by setting out an array of reactive
and proactive options. Responses include reducing insurers' exposure or
controlling claims through risk management to encourage disaster mitigation
measures. The latter has the advantage of reducing overall losses to the community,
rather than merely redistributing them among stakeholders. Natural disaster
insurance can be more selective, so that good risks are rewarded and poor risks
are penalized. Such rate-based incentives can motivate stakeholders to plan
to more effectively minimize exposure to disasters. However, some individuals
and businesses may have difficulties if some previously insurable properties
become uninsurable against flood because of an increase in location-specific
flood frequency. Government intervention and possible co-insurance between government
and insurers also were canvassed. Cooperation between insurers and governments
to ensure development and enforcement of more appropriate building codes and
zoning regulations was regarded as desirable.
12.6.3. Energy and Minerals
Energy demand, essentially for air conditioning, is likely to increase in the
summer and in more tropical parts of Australia and New Zealand (Lowe, 1988).
However, winter demand for heating will similarly decrease in the winter and
in cooler areas. Thus, increasing population in tropical and subtropical parts
of Australia may combine with climate change to increase overall energy demand.
The other major uses of energy in Australia are transport and manufacturing.
Transport demand generally will increase because of population growth but may
be significantly affected by the changing distribution of growth across the
continent, which in turn may be affected by climate change.
In general, warming will slightly reduce energy efficiency in most manufacturing,
including electricity generation, but this is relatively minor compared with
possible technological improvements in efficiency. Any decrease in water supply
(see Section 12.3.1), such as is expected in the
Murray-Darling basin in Australia, would impact adversely on hydroelectric generation
and cooling of power stations, especially where there already is competition
between water uses. Fitzharris and Garr (1996) predict benefits for hydroelectricity
schemes in New Zealand's Southern Alps because they expect less water will be
trapped as snow in the winter, which is the time of peak energy demand for heating.
12.6.4. Coastal Development and Management, Tourism
Economic development is proceeding rapidly in many coastal and tropical areas
of Australia and New Zealand. This is fueled partly by general economic and
population growth, but it is amplified in these regions by resource availability,
shipping access for exports, attractive climates and landscapes, and the growth
of the tourism industry. This selective growth in investment is leading to greater
community risk and insurance exposure to present and future hazards, while many
classes of hazard are expected to increase with global warming (see Table
3-10). Thus, present development trends are likely to make the impacts of
climate change worse, especially for sea-level rise and increasing intensity
of tropical cyclones. Particular attention should be paid to the implications
for the risk to life and property of developments in coastal regions, as well
as ways to reduce vulnerability to these hazards. Possible adaptations include
improved design standards, zoning, early warning systems, evacuation plans,
and emergency services.
Management of waste and pollution from settlements and industry will become
more critical because of the potential for flood and waste discharge to impinge
on water quality, including inland and coastal algal blooms, as well as adverse
effects on ecotourism associated with damage to coral reefs (see Section
12.4.7). Sediment and pollution fluxes into the GBR lagoon already are a
major concern (Larcombe et al., 1996). This could be exacerbated by greater
flood flows (see Sections 126.96.36.199 and 12.6.1)
and increasing population and development. Higher temperatures will accentuate
The other major tourism and recreation sector that is likely to be seriously
affected by climate change is the ski industry, which will be faced with significant
reductions in natural snow cover (see Sections 12.2
and 12.4.4) and limited acceptance of artificial
snow (Konig, 1998). Also, as the potential ranges of certain agricultural pests
such as the fruit fly (see Section 12.5.7) and disease
vectors such as mosquitos (see Section 12.7.1) increase,
possible transfer of such pests and diseases through tourism may become an increasing
12.6.5. Risk Management
As a result of the large uncertainties associated with possible future climate,
as well as the stochastic nature of extreme events, there is great need for
a risk management approach to development planning and engineering standards.
In accordance with the precautionary principle, uncertainty should not be allowed
to stand in the way of risk reduction measures, which in any case often will
have other benefits such as protection of coastal and riverine environments.
Australia and New Zealand have jointly developed a risk management standard
(Standards Australia and Standards New Zealand, 1999) that is designed to provide
a consistent vocabulary and assist risk managers by delineating risk management
as a four-step process that involves risk identification, risk analysis, risk
evaluation, and risk treatment. Beer and Ziolkowski (1995) specifically examined
environmental risk management and produced a risk management framework.
Examples of the application of a risk analysis approach are given in Sections
12.5.2 for pastures in New Zealand, 12.6.1 for
storm surges, and 12.8.4 for irrigation water demand.