Sunday, September 4, 2011

Realistic Disaster Scenarios

Lloyd's, the London-based company that invented the modern profession of insurance, publishes a yearly list of what it calls "Realistic Disaster Scenarios."  The list imagines such events as two consecutive Atlantic seaboard windstorms or an earthquake as the New Madrid fault in the Mississippi Valley, either of which could strain or break an insurer's balance sheet.

The combination of climate change and economic development will force engineering to expand knowledge and capabilities in areas such as risk analysis, risk management, risk mitigation, and a understanding of the global insurance industry (general structure and capabilities).  For example, Swiss Re has been working with McKinsey & Co., the European Commission, and several environmental groups to develop a methodology it calls the "economics of climate adaption," a way to encourage city planners to build in a way that will be insurable in the future. 

To many organizations, both public and private, how you build in the future matters more than the levels of carbon dioxide.

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