THE CHANGING CLIMATE OF CATASTROPHE RISK
Carl Hedde, CPCUHead of Accumulation RisksMunich Reinsurance America, Inc.
IMUA Annual Meeting4 May 2015
Source: NASA
Mark C. Bove, CPCU, AReSenior Research MeteorologistMunich Reinsurance America, Inc.
Agenda
Natural Catastrophes at the start of the 21st Century
You Are Here: Welcome to Our Changing Climate
Climate Change Impacts on U.S. Weather Catastrophes
Inland Marine Risk in a Changing Climate
Natural Catastrophes at the start of the 21st Century
You Are Here: Welcome to Our Changing Climate
Climate Change Impacts on U.S. Weather Catastrophes
Inland Marine Risk in a Changing Climate
2
NATURAL CATASTROPHES AT THE START OFTHE 21ST CENTURY
Source: Munich Re
4
Hurricane KatrinaAugust 29, 2005
Source: Munich Re
5
Post-Tropical Storm SandyOctober 29, 2012
Source: Munich Re
6Photo: FEMA
Joplin EF5 TornadoMay 22, 2011
The Costliest Natural Catastrophes Since 1980In terms of Insured Losses, in Original Dollars
© 2013 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE
8 of the top 10 insuredlosses have occurred inthe past decade
8 of the top 10 insuredlosses have occurred inthe past decade
7 of the top 10 affectedthe United States7 of the top 10 affectedthe United States
5 of the top 10 were U.S.hurricane events5 of the top 10 were U.S.hurricane events
7
Munich Re‘s NatCatSERVICE(www.munichre.com/touch/naturalhazards)
The most comprehensive global database on natural catastrophe losses
Geo Risks Research at Munich Re has collected events and loss data on natural hazards
worldwide since 1974.
Munich Re´s NatCatSERVICE focuses on loss
events with property and/or personal damages.
The loss development of each event is continuously
updated, even if it extends over several years.
About 800-1000 loss events per year are analyzed with the focus on economic, insured,
humanitarian losses and their regional breakdown. Currently more than 35,000 events
are stored in the data base.
The database is the basis for the internal risk assessment, provides detailed information
for different stakeholders and supports scientific research.
© 2013 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE 8
Meteorological events(Tropical storm,extratropical storm,convective storm,local storm)
Hydrological events(Flood,mass movement)
Climatological events(Extreme temperature,drought, forest fire)
Geophysical events(Earthquake, tsunami,volcanic activity)
Loss events worldwide 1980 – 2014Number of events
Number
Source: Munich Re, NatCatSERVICE
Source: Geo Risks Research, NatCatSERVICE – As at January 2015
Meteorological events(Storm)
Hydrological events(Flood, massmovement)
Climatological events(Extreme temperature,drought, forest fire)
Geophysical events(Earthquake, tsunami,volcanic eruption)
Natural Catastrophes Worldwide 1980 – 2010Number of events with relative trends
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: Munich Re NatCatSERVICE 10
YOU ARE HERE:WELCOME TO OUR CHANGING CLIMATE
Source: Munich Re
Is Our Weather Actually Changing?
Long-term weather patterns are always changing.
‒ Abrupt changes: Comet/Meteor Impacts, volcanism, etc.
‒ Very slow changes: Changes in solar radiation, ice ages, atmospheric
chemistry, continental drift, etc.
‒ Local land use changes: Deforestation, urban heat islands, etc.
But there is now an abundance of evidence that human activity is
increasing the rate of change.
‒ Emissions from human activity are changing atmospheric chemistry.
‒ Carbon dioxide and other greenhouse gases prevent excess heat from
radiating away from our planet.
‒ Biggest impacts are currently seen in the ocean and in polar regions.
Long-term weather patterns are always changing.
‒ Abrupt changes: Comet/Meteor Impacts, volcanism, etc.
‒ Very slow changes: Changes in solar radiation, ice ages, atmospheric
chemistry, continental drift, etc.
‒ Local land use changes: Deforestation, urban heat islands, etc.
But there is now an abundance of evidence that human activity is
increasing the rate of change.
‒ Emissions from human activity are changing atmospheric chemistry.
‒ Carbon dioxide and other greenhouse gases prevent excess heat from
radiating away from our planet.
‒ Biggest impacts are currently seen in the ocean and in polar regions.
12
Global Mean Temperature Anomalies,1950 - Present
As compared to 1951- 1980 Average
Source: Munich Re, based on NCDC/NOAA
The 14 warmest
years in the
observation period
1880 to 2014 have
all been since 1998.
The time series
commences in 1880;
the period shown
here is 1950 to 2014
2014 was the
warmest year since
1880.
Climate Change and the World’s Oceans
Source: NOAA
• Water is a very good capacitor of heatenergy, and most of the excess heattrapped by climate change has goneinto our oceans.
• Since the early 1970s, glacier massloss and ocean thermal expansion fromwarming together explain about 75% ofthe observed global mean sea levelrise.
• Our oceans have also absorbedsignificant amounts of excessatmospheric carbon dioxide.
• This creates two big problems: CoralBleaching and Ocean Acidification.
Global average sea level change
All time-series (colored lines indicating different datasets) show annual values, and where assessed,uncertainties are indicated by colored shading.
Arctic Temperature Anomalies, 1880 - 2010
Source:NASA 15
Changes in Arctic Sea Ice Minimum1984 vs. 2012
Source:NASA 16
Changes in Arctic Sea Ice Minimum1984 vs. 2012
Source:NASA 17
CLIMATE CHANGE IMPACTS ON U.S.WEATHER CATASTROPHES
Source: NOAASource: NASA
Climate Change and U.S. Meteorological Perils:General Predictions
The more large-scale the phenomena, the more confident one can be with
predicted likelihood and impacts.
Arid regions will tend to become
drier (Southern California,
Intermountain West and Desert
Southwest)
Wet regions will tend to become
wetter (Pacific Northwest,
Northern Plains, Midwest,
Eastern Seaboard)
Arid regions will tend to become
drier (Southern California,
Intermountain West and Desert
Southwest)
Wet regions will tend to become
wetter (Pacific Northwest,
Northern Plains, Midwest,
Eastern Seaboard)
Winter Storms
Thunderstorms
Tropical Cyclones
Winter Storms
Thunderstorms
Tropical Cyclones
Most confidenceChanges in Hydrological CycleMost confidenceChanges in Hydrological Cycle
Less confidenceChanges in frequency andseverity of
Less confidenceChanges in frequency andseverity of
19
Projected Change in Precipitation,2021-2040 vs. 1950-2000 (%)
Source: GFDL / NOAA 20
Heavy precipitation in North AmericaObserved and projected changes
Observed changes
- Increasing frequency and intensity of heavy precipitation events
- Strongest increase in heavy precipitation in the region Midwest and Northeast
Projected changes
-> Precipitation intensity rise over the contiguous North America
-> Events with extreme precipitation will become more frequent
Annual number of days with very heavyrainfall in the central U.S., „very heavy“being defined as within the upper 0.3%of all daily precipitation events
Source: Munich Re – Severe weather in North America, 2012
Extreme Precipitation Events in the U.S., 2014 - 2015
22
Pensacola, Florida: 20” of rain over April29 & 30
Detroit, Michigan: 4-6” of rain in in a 4-hour period on August 11.
Islip, New York: 13” of rain in a single dayon August 13.
Phoenix, Arizona: 4-5” of rain onSeptember 7.
Buffalo, New York: Over 6 feet of snowover thecourse of 4 days.
Northern California: averaged of 2-4” ofrain during first week of December.
Boston,MA: 6’ of snow in 2 weeksSource: FEMASource: FEMA
Climate Change, Socioeconomic Trends,and Flooding
Urban and suburban sprawl has created problems for severe floodpotential across the United States Reduction or modification of natural drainage patterns Development of flood plains Potential for levee failures
Source: Munich Re23
Droughts in North AmericaObserved and projected changes
Projected changes
- Increasing trends in heatwave frequency and duration for North America
- Average temperatures rise throughout the continent
- Precipitation amounts decrease in the southern U.S.
Source: Munich Re – Severe weather in North America, 2012
Projected change in thenumber of months withdrier conditions in the timeperiod 2035 to 2065,relative to the 20thcentury
The 2010s Great California Drought
25Source: NASA/JPL
Climate Change, Socioeconomic Trends,and Drought
Physical property damage:
‒ Agriculture (plants and livestock)
‒ Wildfires & Suburban Sprawl
Business Interruption potential:
‒ Electric power generation
Hydroelectric
Nuclear
‒ Resource reduction
Lack of sufficient water for commercial, agricultural, or industrial use
Limited electricity due to shutdowns of hydro and nuclear facilities
Physical property damage:
‒ Agriculture (plants and livestock)
‒ Wildfires & Suburban Sprawl
Business Interruption potential:
‒ Electric power generation
Hydroelectric
Nuclear
‒ Resource reduction
Lack of sufficient water for commercial, agricultural, or industrial use
Limited electricity due to shutdowns of hydro and nuclear facilities
26Source: California Division of Forestry
Source: Property Claims ServiceMR NatCatSERVICE
U.S. Thunderstorm Loss TrendsAnnual Totals 1980 – 2014
Average thunderstorm losses have increased sevenfold since 1980.Average thunderstorm losses have increased sevenfold since 1980.
27
Thunderstorms and Climate Change
Due to the small-scale, localized nature of severe thunderstorms and
their associated hazards, it is hard to tell what impact climate change
will have on these storms.
Increased atmospheric moisture and heat will likely increase the
number of days per year that severe thunderstorms are possible in
certain areas of the globe.
Some studies already indicating more large hail events over past 50
years; unclear if naturally driven change or influence by human activity.
Socioeconomic factors will likely dominate thunderstorm loss potential
for the foreseeable future.
Due to the small-scale, localized nature of severe thunderstorms and
their associated hazards, it is hard to tell what impact climate change
will have on these storms.
Increased atmospheric moisture and heat will likely increase the
number of days per year that severe thunderstorms are possible in
certain areas of the globe.
Some studies already indicating more large hail events over past 50
years; unclear if naturally driven change or influence by human activity.
Socioeconomic factors will likely dominate thunderstorm loss potential
for the foreseeable future.
28
Winter Storms and Climate Change
Observed changes
- Winter storm activity is affected by the ENSO-phases
- No long-term trend in frequency has emerged from 1950 onwards
- Number of storms with high wind speeds is increasing while weaker storms are declining
(especially for storms originating in the Pacific)
Projected changes
-> No general increase in the frequency of winter storms
-> Intensity of the winter storms increase
Extreme wind speeds, i.e. the value of windspeed that demarcates the top 5% highestwind speeds per year for the Pacific region(20°-70°N, 130°E-112.5°W)
Source: Munich Re – Severe weather in North America, 2012
Climate Change & Hurricanes
Increased sea surface
temperatures, caused at least
in part by anthropogenic
activities, is leading to an
increase in intense tropical
cyclones worldwide as
compared to historic activity,
particularly in the Atlantic.
Increased sea surface
temperatures, caused at least
in part by anthropogenic
activities, is leading to an
increase in intense tropical
cyclones worldwide as
compared to historic activity,
particularly in the Atlantic.
In 2004 & 2005, there were two groups of thought in scientific community:In 2004 & 2005, there were two groups of thought in scientific community:
Tropical cyclone data is poor or
sparse as you go back in time,
making it difficult to compare
current and past frequency and
intensity levels. Recent
increase in frequency and
intensity of storms in the
Atlantic due to natural
variability.
Tropical cyclone data is poor or
sparse as you go back in time,
making it difficult to compare
current and past frequency and
intensity levels. Recent
increase in frequency and
intensity of storms in the
Atlantic due to natural
variability.
30
Annual Number of AtlanticTropical Cyclones, 1900 – 2014
CompleteNear-complete
Incomplete
Source: Munich Re 31
Complete
Annual Number of U.S. LandfallingTropical Cyclones, 1900 – 2014
Source: Munich Re 32
Impact of Oceanic Heat Increase onAtlantic Hurricane Climate
Ocean warming has led to
an apparent linear increasing
trend in the decadal-scale
AMO cycle.
33Source: NOAA
Impact of Sea Level Rise onHurricane Impacts
Sea level rise will make damage from future storm surge events worse,
even if there is no change in the hazard itself.
34Source: NOAA
Atlantic Hurricane Outlookfor Next 10–20 Years
Continued increased activity for duration of current AMO warm phase.
For how many more years will our current 20-year warm phase
continue? Or has it already ended?
Can the historical record still be relied upon to forecast future activity?
‒ Indications are that the influence of global warming will make future
hurricane activity different than past activity.
Future cold phases of AMO cycle may not be as strong as in the
past, diminishing its negative influence on hurricane development.
Latest modeling studies indicate no major increase in number of
storms developing
Increase in major hurricane landfalls / fewer weaker hurricanes
Increase of quantity of storms making landfall is less certain
Continued increased activity for duration of current AMO warm phase.
For how many more years will our current 20-year warm phase
continue? Or has it already ended?
Can the historical record still be relied upon to forecast future activity?
‒ Indications are that the influence of global warming will make future
hurricane activity different than past activity.
Future cold phases of AMO cycle may not be as strong as in the
past, diminishing its negative influence on hurricane development.
Latest modeling studies indicate no major increase in number of
storms developing
Increase in major hurricane landfalls / fewer weaker hurricanes
Increase of quantity of storms making landfall is less certain35
Challenges in Modeling Inland MarineNatural Catastrophe Losses
36
Lessons from recent events
Marine Cat losses can be highly correlated with Property Cat losses
While EQ risk can be significant, for many Marine segments, water (Surge,
Flood, Tsunami) appears to be the main hazard
Big (reinsurance) accumulation losses are driven by single accounts with large
primary insurance limits and high value concentrations (primaries will have a
different story)
Modeling of Marine vulnerability has much room for improvement
Vulnerability assumptions
Key Challenges for Marine Modelling;
Moving risks;Unknown or assumed
locations
Variable storage values over time
Dramatic Results – Will your underwritingdistinguish the difference?
5/8/20 39Building Science is Changing!
IBHS – Sealed Roof Deck Testing – Water Intrusion
5/8/20 40Building Science is Changing!
Building a better way - IBHS Fortified Program
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Source: NASA
