In May scientists from various fields, policymakers, economists and representatives from government and international organisations gathered in London to debate the challenges posed by exponential population growth.
Population growth is a mega-trend for the future, something that will impact everything from society and climate to business and politics. Failure to meet the needs of the global population, which is expected to grow to 9.5 billion by the end of the century, could result in widespread hunger, thirst and conflict.
As populations grow, the demand for resources also has a negative impact on other mega-trends such as climate change, urbanisation and natural catastrophes.
Full to capacity
Evidence the planet is exceeding its capacity can be seen at both a macro and local level. Climate change along with the loss of ecosystems and biodiversity is evidence of how humans are altering natural cycles.
“We’re rapidly depleting the world of its building blocks,” says Professor Georgina Mace, from the Centre for Population Biology at Imperial College London. “Locally, there is an increasing frequency of disease outbreaks and of a large number of people being impacted by floods or cyclones or food shortages. Those things are a symptom of a wider problem.”
She is concerned that population growth and population density will impact people’s wellbeing in future. “As you move to more and more people, they tend to live in more crowded places and health – whether it’s disease or mental or public health – all start to deteriorate,” she says.
“At the moment people are not dying because of climate change but they are dying because they’re being forced to live in places at high densities that are very vulnerable to flooding or disease,” she continues. “There are big winners and big losers and we’re dealing with very short-term problems when we should be thinking about the long term.”
Resources and consumption
The problem is not just catering to more people, explains Mace, it is also the fact that today’s population has a bigger impact on the planet than it used to. “We use more resources, we’re bigger consumers and we emit more carbon.”
Intensive farming methods are already causing desertification in many parts of the world as well as other problems. “There’s no question that many of the food-related global impacts – things like BSE and Bird Flu – are actually symptoms of a system of agriculture that is so intensive that we’re having to force a lot of productivity out of a very small resource base,” says Mace.
A report on Global Water Scarcity published in 2010 by Lloyd’s 360 Risk Insight team considered the impact of population growth on water resources. In regions where water scarcity and good sanitation is already an issue an additional three billion people is likely to add considerable stress, it warned.
Mace thinks attempts to alter patterns of consumption will have more success in the near-term than intervention in demographic profiles. The average human lifespan means it could take a long time for any attempt at population control to be felt.
Insurance role
While population growth is ultimately an issue for governments and society, the insurance industry will inevitably play a role, thinks Neil Smith, manager of emerging risks & research in Lloyd’s Exposure Management team.
“Climate change, global water scarcity, energy security, food security and population growth are all interlinked and to solve that will require national and international governments working together,” he says. “But the insurance industry will almost certainly be impacted in various areas in terms of our business. There could be supply chain implications for businesses and any sort of geopolitical unrest could impact on insurance.”
These are issues that are already occurring. Recent geo-political disturbance can be linked to resource scarcity, points out Smith. “It’s happening now and the rise in food prices is definitely a factor in the unrest that we’re seeing in Northern Africa and the Middle East.”
Nat cat exposure
The fact that populations are also becoming more vulnerable to natural hazards also has significant insurance ramifications. “There is the potential for increased insurance losses from natural catastrophes as a result of human population growth,” says Smith.
“Not only are we seeing population growth but we’re also seeing increasing concentrations of populations in urban areas. For the first time there are more people living in urban areas than rural areas globally, so there are higher concentrations of risk. Furthermore there is increasing evidence that climate change is causing more frequent extreme weather events.”
“We’re also seeing increased populations in areas vulnerable to natural catastrophes – namely in coastal areas or areas prone to flooding,” he continues. “That’s where a lot of existing urban areas are off river deltas and coasts so there could be an impact on the insurance industry from increased insurance losses because of that concentration in potentially vulnerable areas.”
This is a phenomenon noted by Swiss Re in its latest Sigma report. It looked at long-term trends in earthquake activity and found that while seismic threat has not increased (despite the high number of recent earthquakes), the number of fatalities and insurance losses have risen dramatically.
“A significant trend has been noted on the exposure side: population growth and higher population density, especially in urban areas, exposes more people to a single damaging earthquake,” says Swiss Re Sigma.
The role of insurance will undoubtedly become more important as the world comes to terms with the pressures of a growing population. Yet insurance penetration remains very low in some of the most vulnerable regions.
The total economic cost from natural catastrophes and manmade disasters – in which approximately 304,000 people died – was $218bn in 2010, according to Swiss Re. However, insurance losses were less than a fifth of that figure at just over $43bn.
“These events show the urgent need to strongly improve prevention and post disaster management in order to reduce human suffering,” said Thomas Hess, chief economist of Swiss Re.
“The rapidly increasing wealth in emerging markets should also be used to address these problems,” he continues. “This wealth will also allow insurance to grow and close part of the large insurance protection gap in many emerging markets, the main reason why the financial protection against catastrophes is low in most emerging markets.”
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