The speed, size and scope of the modifications that humans are making to nature – and that in turn are impacting us – are unprecedented. We have always seen man-made developments leading to changes in health, with both positive and negative impacts, but the magnitude of climate change and its many irreversible aspects are unprecedented. Most importantly, it is happening faster than the ecosystem can adapt, leading to disruption and higher volatility.
This means that projections of future morbidity and mortality are becoming more challenging, and we are more likely to need protection and resilience against shock events and trends. It is, therefore, imperative that companies with long-term business interests, such as life insurers, work toward an understanding of climate change and its direct and indirect impacts on that business. This may include potential upsides, such as opportunities for diversification or support of mitigation actions.
Here are 5 and a half climate change impacts relevant for life & health insurers underlying the main climate change-driven risks and their link to life liabilities.
1. Extreme heat is the new norm
While climate change is driving up average temperatures globally, it is more complicated than a uniform rise in temperatures, and there are many aspects to consider.
According to the IPCC, there is at least a greater than 50% likelihood that global warming will reach or exceed 1.5°C in the near‐term (2021-2040). This increases both the probability of extreme heat and the number of days with unprecedented heat. The upside of this scenario could be fewer cases of cold-related deaths. However, if the variability of temperature (the second moment of the distribution) increases as well, which is very likely, then there are fewer gains in extreme cold, but the unprecedented heat increases in relevance.
Extreme heat in combination with high humidity is predicted to lead to parts of the world becoming uninhabitable to humans, because our bodies will no longer be able to thermoregulate by sweating. Another aspect is that night-time temperatures do not drop as much as they used to, which puts additional stress on humans and other animals. A third aspect is that milder winters disrupt natural defense cycles, e.g. against certain insect pests.
All of these developments have consequences for human health. While some are direct, like heat-strokes, higher overall temperatures also aggravate some existing conditions and can lead to more cardiovascular and pulmonary events, including related deaths. Our second paper will dive into the details of these mechanisms.
Mitigation factors such as the adaptation of building and construction norms, the availability of cool and green spaces, working conditions, and migration, will influence the individual and local extent of the impact.
2. Extreme weather events gain in frequency and intensity
Several natural catastrophes such as windstorms, floods and droughts are known to be exacerbated by climate change. Aside from the physical damage they inflict, their increasing frequency and severity will also lead to direct loss of life and have long-term detrimental impacts on human wellbeing.
Depending on the local economic and political situation, droughts can lead to famine and social unrest. Floods and storms can cause displacement of population groups, leading to increasing social pressure. Economic development can be stunted by these events, leaving fewer resources for education, health systems and fighting climate change.
However, the impacts also depend on some factors that are under human control, such as building standards and city planning, water management, and political stability.
3. Air pollution: a threat to both human and planet health
Increased temperatures are expected to lead to frequent wildfires and heatwaves, which will increase air pollution even further. There is mounting scientific evidence that exposure to air pollution leads to adverse health outcomes at much lower levels of air pollution than previously thought. PM is a particular concern because when the particulates are inhaled, they can become lodged in the lungs or absorbed into the bloodstream and transported through the body.
In 2016, the WHO attributed 24% of stroke, 25% of ischaemic heart disease (IHD), 28% of lung cancer and 43% of chronic obstructive pulmonary disease (COPD) cases to air pollution worldwide. The subject was revisited in a 2019 report that outlines how air pollution contributes to more than 5 million deaths annually by causing or exacerbating noncommunicable.
Air quality has a very high spatial heterogeneity and seasonal variability and is linked to economic developments and political trends among other factors. This makes estimating its outcomes regarding the biometric data of sub-populations very challenging, despite the well-known physiological mechanisms of how air pollution is causing harm to humans, which we will cover in our next paper.
4. Animal and human diseases, including zoonoses, are emerging in new areas
Climate change and shifts in ecological conditions, such as changes in temperature, precipitation patterns and extreme weather events, can promote the spread of pathogens, parasites, and diseases. These include high-profile mosquito-transmitted diseases such as malaria, Zika and dengue fever. Many of them spread better under higher temperatures, and benefit from milder winters that no longer decimate them.
Many theories exist regarding the links between climate change and pandemics, infectious diseases in their extreme form. They generally shed a light on the interconnectedness of driving factors, and how indirect effects can be fundamental in explaining outcomes. Understanding the 1998 outbreak of Nipah Virus in Malaysia with 265 infected and 105 fatalities is an example illustrating this principle.
The specific extent to which climate change affects vector-borne diseases is vector-, host-and disease-dependent. However, the spread of infectious diseases also depends on other factors: sociodemographic influences, drug resistance and nutrition, as well as environmental influences such as deforestation, agricultural development, water projects, urbanization, global development and land-use change. As a specific example, the decimation of larger animals by humans opens ecological niches for smaller animals with a shorter lifespan, which have a higher metabolism and higher load of pathogens.
The relevance of infectious diseases for life insurance is dependent on how effective societies are at coping with or countering the facilitating factors. Industrialized countries can provide public health infrastructure and programs to monitor, manage, and prevent the spread of many diseases. The burden of climate-sensitive diseases is much higher in poorer countries less capable of preventing and treating illnesses, from where they then can spread to other parts of the globe.
5. Equal access to water, sanitation and food security are compromised
Low water quality is a major source of global mortality and morbidity. According to the WHO, 1.8 billion people use drinking-water sources contaminated with feces. Flooding and heavy rainfall (which change their patterns due to climate change) sometimes cause overflows from sewage treatment plants into fresh water sources or agricultural plots, which may contaminate drinking water or food. In addition, this can also increase the number and prevalence of waterborne parasites found in drinking water. While some regions are expected to see an increase in rainfall driven by climate change, it could lead to water shortages in other (mostly already arid or semi-arid) regions due to droughts.
Agriculture is at the mercy of extreme events and unpredictable weather. The increase in the frequency and severity of droughts, floods and severe weather is likely to drive yields down. The elevated CO2 levels and higher temperatures have an impact on the development of some species of weeds, insects and other pests, which could decrease the average crop yields. Global yields could decline by up to 30% by 2050, while in some regions, warmer temperatures may increase crop yields. Climate change is also likely to lead to a poleward shift of the highly productive agricultural areas. As a result, tropical developing regions will be hit hardest by climate change. This could induce forced migrations of populations and geopolitical issues.
Food safety is also likely to be affected by climate change. The increase in humidity and temperature favors the bacterial and fungal contamination of food, such as with salmonella or mycotoxin produced by molds. Anthropogenic activity also leads to risks for food safety due to contamination by pesticide residues and other pollutants in the food chain. For example, the toxic methylmercury load of fish increases by 3-5% for each 1°C rise in water temperature.
More than any of the other climate change-driven perils discussed so far, water and food security are subject to political and economic conditions. They have contributing factors beyond climate change that are, in principle, amenable to improvement but burdened by the complexity of actors and scope.
5½. The indirect consequences: mental health & migrations
Besides the obvious and direct impacts of climate change as discussed above, it is key to also consider the potential indirect impacts.
The prime example is mental health, which was cited for the first time in the 2022 IPCC report. There are many aspects to this, including stress resulting from having been exposed to extreme weather events, anxiety for the future of the Earth, and despair about the destruction of nature. There is also a relationship between increased temperatures and suicide numbers. According to the literature, for every one person affected physically during a disaster, 40 people are affected psychologically. 
Climate change will also lead to displacements and the migration of populations, due to effects such as water scarcity, desertification, and the geopolitical conflicts that often surround resources. Among the many other problems it creates, population displacement undermines the provision of medical care and vaccination programs, hinders the effective fight against many infectious diseases and can lead to sociopolitical unrest. As an example, some analysts quoted the rise in food prices as the cause of the Arab Spring movement.
The global population in low-elevation coastal zones is expected to strongly increase over the next decades, and many of the world’s megacities are located in coastal zones. Currently, there are more than 150 cities with more than one million inhabitants in coastal areas, and the already “built in” sea-level rise of 0.5 m by 2100 is threatening the future of these populations (and indeed of some small island nations altogether). Actions such as defending against inundations and re-building after flooding and soil subsidence take resources away from economic development elsewhere, such as in education and public health.
Attributing parts of these indirect impacts to climate change is a highly challenging task.
The relevance of climate change for life insurance
Given the multitude of direct and indirect impacts from climate change, how can an insurance undertaking select those that are relevant for its business? The following observations may help.
- The relevance depends on the type of insurance product. This is especially evident for the frequently cited example of vector-borne infectious diseases (such as malaria, Zika, chikungunya, dengue fever) that are expected to occur more frequently and over a wider geographic range due to climate change. They are generally non-fatal, which means that even a very strong increase will not affect mortality covers. This peril is only relevant in conjunction with disability or medical covers.
- The relevance depends on the region of the world. For instance, air quality is poorer in Asia than in Europe. Extreme floods, droughts and hurricanes, as well as food and water shortages, are unevenly distributed. This means the geographical area of an insurer’s activities plays a major role. It also explains why it is very helpful in communications to always combine specific climate change-caused perils with a region or market, by talking for instance about “air pollution Australia,” “heat wave UK,” or “vector-borne diseases U.S.” Life insurance is far from spread evenly across the world; it is highly concentrated in developed countries, which are less exposed to most of the perils discussed.
- The relevance depends on the age profile of the insureds. The WHO’s fact sheet on climate change and health from 2014 predicts : “Between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year, mainly from malnutrition, malaria, diarrhoea, and heat stress” and specifies “38,000 due to heat exposure in elderly people, 48,000 due to diarrhoea, 60,000 due to malaria, and 95,000 due to childhood undernutrition.” Deaths from diarrhoea and malaria predominantly affect younger children as well, meaning that the majority of climate change victims will be the very young and the very old. Generally speaking, these groups tend to have less insurance cover.
- The relevance depends on the health and socioeconomic status of the insureds. When considering the biometric consequences of climate change for life insurance, it is important to understand that the general population expectation is not representative of the insured population. People who can afford life insurance have better socioeconomic status and health than average (including as a consequence of selection through medical underwriting), and a lower proportion of manual and outdoor work. This was starkly evidenced in lower Covid-19 mortality in the insured population. There are exceptions, though. Wealth can protect against malnutrition, but not as easily against poor air quality.
- The relevance of indirect impacts will be difficult to gauge and to detect among the volatility of biometric observations, and needs to be followed by monitoring early signals. Mental health, for instance, is a very relevant concern for all parts of the population as it is linked to the immune system and also to accidents and suicides.
In summary, the relevance of climate change-driven risks for insurance liabilities will depend on the individual profile of the insurer, and can only be assessed on a case-by-case basis. Suitable tools are sensitivities and scenarios adapted to the duration and nature of the portfolio.
For more insights by Dr. Irene Merk, including a scenario on quantifying the impact of U.S. heat on SCOR’s portfolio, please click on the link below:
- Looi LM, Chua KB. Lessons from the Nipah virus outbreak in Malaysia. Malays J Pathol. 2007 Dec;29(2):63-7. PMID: 19108397.
- Lawrance, E. et al. (2021) “The impact of climate change on mental health and emotional wellbeing: current evidence and implications for policy and practice”, Grantham Institute
- WHO (2014) “Quantitative risk assessment of the effects of climate change on selected causes of death, 2030s and 2050s”
- IPCC, 2022: Climate Change 2022: Impacts, Adaptation, and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press. In Press.