Notwithstanding the ambiguities surrounding Climategate, which is put nicely in context by George Monbiot here, the majority in the insurance industry are inclined to believe the climate is indeed changing. Under a warming world clearly weather patterns are likely to change, but for the reinsurance sector, key questions revolve around the impact on catastrophe events and losses:

• Will we see more (and more intense) hurricanes in the future than in the past?
• Will rising sea-levels mean worse coastal surges?
• Can we expect more flooding due to extreme precipitation events?
• Will heatwaves increase wildfire events and exacerbate crop insurance losses?

The IPCC report in 2007 says Likely, Likely, Very Likely, Very Likely in answer to the above questions, and the large majority of subsequent research supports this view. Given that (re)insurers will pick up much of the cost of additional losses, it’s no surprise that a substantial amount of effort is going in to translating the emerging science of climate change into insurance loss impacts.

A useful recent addition to this work was published by the ABI (pdf here) supported by AIR and the UK Met Office, and includes impact analysis of 2, 4 and 6 degrees of warming on UK Flood risk.

Two flavours of El Niño
Recent research about El Niño (widely credited with helping suppress Atlantic hurricane activity in 2009) under warming conditions, suggests that in future we may experience more central Pacific El Ninos, rather than the typical eastern Pacific ones. Bad news is that the central Pacific ones may not suppress Atlantic hurricanes to the same degree. [link]

While there is still uncertainty and disagreement in the scientific community around how global warming will influence hurricane formation, it’s worth remembering that we have already seen anomalous Atlantic hurricane activity this decade in terms of geographical extent (north east and south Atlantic) and duration of the ’season’ which saw the official close (30th Nov) of the 2005 season extend into the following January.

Clearly much uncertainty remains as to how exactly climate change will \ is already influencing catastrophe risk, and it is vitally important that the insurance industry continues to follow the academic research and reflect emerging trends into our risk frameworks.

This entry was posted by Paul Nunn on Tuesday, December 15th, 2009 at 10:50 am and is filed under Exposure Management.