Been anywhere nice on your holidays? No I haven’t turned into a hairdresser. But I have just returned from my summer vacation. I went with the family to Shropshire, a pretty county on the Welsh borders.
We visited a fascinating place called Coalbrookdale, a town that sits in a fold of the countryside known as the Ironbridge Gorge. It is probably the most important place in the history of the world.
That’s why it is a World Heritage Site, alongside destinations such as the Acropolis in Athens, the pyramid fields of Eygpt, Venice and the Grand Canyon National Park.
Coalbrookdale is not a place of outstanding natural beauty, however. What makes this place extraordinary is that it was the cradle of industrialisation. What happened in Coalbrookdale 300 years ago changed the world for better and for worse.
In 1709, Abraham Darby was the first to smelt iron successfully in a blast furnace there using coke instead of charcoal. He also perfected the technique of casting iron.
Until Darby’s breakthrough in coke smelting, woodlands had to be managed very carefully to ensure a constant supply of timber for conversion into charcoal. Instead his process used the coal that could be mined around Coalbrookdale no matter what the season. Locally mined iron ore and limestone plus water from the River Severn completed the ingredients.
What happened in Coalbrookdale accelerated the growth of modern consumerism and economies based on people working for wages to buy things made by others. Thomas Darby and the other ironmasters in the Ironbridge Gorge literally sparked the industrial revolution.
This is how Italian diplomat Carlo Castone della Torre di Renzionico Comasco described his visit in 1787. “The approach to Coalbrookdale appeared to be a veritable descent in the infernal regions. A dense column of smoke rose from the Earth; volumes of steam were ejected from fire engines; a blacker cloud issued from a tower in which was a forge; and smoke arose from a mountain of burning coals which burst out into turbid flames.”
The blast furnaces in Coalbrookdale are silent now. The revolution overtook them and in 300 years industrialisation has gone global, improving the quality of life for ordinary people everywhere – but at what cost?
Writing in the forthcoming Autumn issue of CRO Risk Forum, Munich Re’s chief risk officer Joachim Oechslin says that insurers need to take note of the changes in the environment wrought by industrialisation.
Compared to the pre-industrial era, the atmospheric concentration of CO2 has increased by 36%, that of nitrous oxide (N2O) by 18% and that of methane (CH4) by 148%.
Oechslin says that over the past century, the additional greenhouse gases produced since the beginning of the industrial era (additional anthropogenic greenhouse effect) have caused the global mean annual temperature at ground level to rise by 0.74°C.
In the past 100 years, the average temperature has risen by 0.7°C around the globe, by 1.1°C in Germany and by 1.5°C in the Alps.
This global warming effect is affecting the frequency and intensity of extreme weather events. It may not be influencing hurricane patterns in the North Atlantic greatly – reinsurers’ main obsession – but it is causing torrential rainstorms, heat waves, droughts and more severe cyclones in a number of ocean basins.
Oechslin says there’s no need to panic: but instead insurers and reinsurers should respond by innovating in their field of expertise. They should develop new covers to reduce risks for investors in renewable energies, such as performance warranty covers. They should rise to the challenge of writing insurance for offshore windfarms and buyers and sellers of emissions credits.
They should invest directly in renewable energy projects. Munich Re has set a good example, initiating the world’s largest renewable energy project to date, which has the goal of producing electricity in the deserts of northern Africa to supply power both for local markets and for Europe.
In other words, insurers and reinsurers should be supporting latter day Thomas Darby figures: those people sparking a revolution. The difference is that this time it is a renewable revolution.