Recently, Swiss Re announced that that the firm believes that 2017’s series of catastrophes occurring in the second half of the year is not a one-in-100 year event, but more like a one-in-10 year event:
"Climate change is in fact warming not just the Earth but also the oceans and one of the reasons why the expectation of future hurricanes is so high is that last years' three hurricanes together—the $135 billion of losses—are a one-in-10-year event not a one in a 100-year event….We see the possibility for a repetition of these kinds of losses in the foreseeable future." -John Dacey, Chief Financial Officer, Swiss Re
Dacey is not the only high-profile insurance executive to comment on climate change. Evan Greenberg, Chairman and CEO of Chubb, recently asked, “Given there have been three one-in-100-year floods in 18 months, how can Harvey represent a 1 percent chance of occurring as the models suggested?”These statements are not only commentary on climate trends, but a manifestation of the frustration felt by the insurance community in the aftermath of 2017’s losses—not to mention operational and organizational strain. In answer to Greenberg’s question, many of the data providers we work with are at the forefront of science and are working to innovate modeling approaches to better understand the impact of climate change on flood risk. Models and the outputs are nuanced, and data providers have different views on climate change and modeling flood risk. That’s why it’s important to have multiple sources of data (even for the same region) at your disposal, so you can identify the right models and model components that best represent your lines of business, geography, and business practices. At SpatialKey, we’re not experts on climate change trends; but, we do provide insurance professionals with the choice and ability to activate the right data for your regional needs, underwriting guidelines, and in accordance with your risk appetites.
Dag Lohmann, co-founder, KatRisk: “I would not subscribe to a hypothesis of an increase in natural disasters for all perils and regions. We certainly saw a huge spike in 2017 in the U.S. But, separating natural variability from trends is work in progress, in my opinion; especially when humans continue to spread out, we will have more events. In some areas the signal is very clear, such as sea level rise. In others, I would caution and refer to statements the IPCC (Intergovernmental Panel on Climate Change) makes, for example, for flood and precipitation extremes. A specific area to watch out for are tropical cyclone precipitation and flood events. The IPCC strikes a good balance of what we know and where we need to spend more time. The insurance industry is watching these developments carefully, and I can see an interesting intellectual debate in almost every company we talk with….Cat models like ours are at this fascinating intersection of science and engineering with many social aspects and human behavior. They are a great tool to compute climate change sensitivity—if the models have been built with climate change in mind.” Read more now
Peter Hausmann, Head of Nat Cat and Engineering Solutions, Swiss Re: “In the early nineties, Swiss Re launched the climate change topic in the insurance industry and since then observes the loss development and the scientific insights. While the global trends are pretty clear, it is difficult to forecast changes regarding individual hazards, like wind or flood, for a certain location on earth. Furthermore, many changes like sea level rise, for example, are long-term and do not require a frequent adjustment of the data. Innovation happens mainly in the feasibility to model flood, storm surge, or tsunami hazard zones for the whole globe using high-resolution terrain model data. A smart approach combined with parallel computing makes this possible.” Read more now
Jane Toothill, Director, JBA Risk Management: “Climate change adds an extra element of uncertainty into flood maps and models. We also expect that it may cause the potential for flooding at properties not previously considered to be at risk, for example in areas affected by rising sea levels. The impact on precipitation patterns and the frequency and severity of extreme events is hard to estimate. The impacts of climate change will not be uniform across the world, or even within a country such as France—the impact is expected to vary from region to region….We are collaborating with world-leading academics and industry experts to provide insight into the changing risk associated with climate change-induced flooding. Our innovations help insurers assess the potential impact of climate change to their exposure at portfolio level for pricing and capital management purposes, for example via our new UK Flood Climate Change Model. And, identify areas in which flood risk is expected to increase or decrease, so that underwriters may incorporate predicted changes into their underwriting strategy and grow or shrink their portfolio in these different areas accordingly.” Read more now
Evan Shallcross, Technical Manager, Ambiental: “A rapidly changing climate means there’s no room for complacency with flood risk. Extreme and unprecedented events allow us to validate our models and make adjustments where needed. Having the most up-to-date data is critical with flood risk. Given that flood risk could significantly increase, we’re working with climate models to build new “future-focused” flood maps which will help insurers get ahead of the climate change curve and create longer-term strategies.” Read more nowGet in touch to learn more about accessing data from these providers and many others!