Climate Change and the Insurance Industry

Windstorm disasters (including storm surges) account for about one-third of all natural disasters throughout the world (by number, fatalities and economic losses), but for more than two-thirds of the corresponding insured losses. Trend analyses reveal that major windstorm disasters and the losses generated by them have increased drastically in recent decades. Risk partnership between the state, the affected population and the insurance industry assumes a key role with regard to the windstorm hazard. Scientists, engineers and insurers must work together in formulating their requirements and shaping them in such a way that politicians can derive clearly recognizable policy options (e.g. land-use, restrictions, design-code adjustments) from them. Another important aspect is stepping up the efforts being made towards curbing climate change, which will, otherwise, exacerbate the risk in the future.

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'Islands of excellence’ in catastrophe & disaster risk data, tools and services in the face of the climate change crisis – how can innovation systems advance stakeholder understanding and use of catastrophe and disaster sciences?

10.5194/egusphere-egu2020-18571 ◽

2020 ◽

Author(s):

Tracy Irvine

Keyword(s):

Climate Change ◽

Insurance Industry ◽

Disaster Risk ◽

Scientific Data ◽

Academic Institutions ◽

The World ◽

The Face ◽

Innovation Approach ◽

Systems Transformation ◽

Science Innovation

New catastrophe and disaster risk data, tools and services can often include complex science and algorithms that offer profoundly important information on understanding risk or can inform climate adaption. However, if few people know about or understand how and in what context to use these tools, they remain on the databases of academic institutions and in scientific journals across the world. How many tools that could transform the world&#8217;s understanding of risk and ways to adapt to that risk already exist or are currently under development? The answer is likely to be in the hundreds. But, how many of those tools have ever been used beyond one or two scientific case studies? The answer is likely to be, in most cases, very few.&#160;Academic institutions often administer barriers on access to their data and tools through institutional data management and by specifically implementing non-commercial use licensing in the dissemination of tools once scientific studies are completed. In addition, very commonly, insufficient thought is put to the exploitation strategies of these tools. The gaps in understanding and trust between academia and the needs of business sometimes feel insurmountable on both sides. Is &#8216;custom&#8217; defying reason in the face of the climate change crisis and the need for rapid systems transformation globally?&#160;The Oasis family, offers new approaches around transparency, collaboration, dissemination and exploitation and the encouragement of intereoperability by providing platforms that allow for comparative approaches to scientific data and tools.&#160;Firstly, "OASIS LMF is an open source platform for developing, deploying and executing catastrophe models to enable the &#8220;plug and play&#8221; of hazard and vulnerability modules (along with exposure and insurance policy terms) by way of a set of data standards that describe a model. It has been built in collaboration with the insurance industry (https://oasislmf.org/)." Oasis Palmtree offers support to enable access to this system.&#160;Secondly, Oasis Hub, has designed science innovation approaches to bringing tools and data to wider, diverse audiences in collaboration with scientific institutions. We discuss "OASIS Hub, as a global window and conduit to free and commercial environmental, catastrophe and risk data, tools and services (https://oasishub.co/) as an example of a new innovation approach.

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Assessing the global risk of climate change to re/insurers using catastrophe models and hazard maps

10.5194/egusphere-egu2020-5323 ◽

2020 ◽

Author(s):

Sarah Jones ◽

Emma Raven ◽

Jane Toothill

Keyword(s):

Climate Change ◽

Sea Level ◽

Flood Risk ◽

River Flow ◽

Climate Model ◽

Flood Hazard ◽

Insurance Industry ◽

Global Climate Model ◽

Hazard Maps ◽

The Impact

In 2018 worldwide natural catastrophe losses were estimated at around USD $155 billion, resulting in the fourth-highest insurance payout on sigma records, and in 2020 JBA Risk Management (JBA) estimate 2 billion people will be at risk to inland flooding. By 2100, under a 1.5&#176;C warming scenario, the cost of coastal flooding alone as a result of sea level rise could reach USD $10.2 trillion per year, assuming no further adaptation. It is therefore imperative to understand the impact climate change may have on global flood risk and insured losses in the future.The re/insurance industry has an important role to play in providing financial resilience in a changing climate. Although integrating climate science into financial business remains in its infancy, modelling companies like JBA are increasingly developing new data and services to help assess the potential impact of climate change on insurance exposure.We will discuss several approaches to incorporating climate change projections with flood risk data using examples from research collaborations and commercial projects. Our case studies will include: (1) building a national-scale climate change flood model through the application of projected changes in river flow, rainfall and sea level to the stochastic event set in the model, and (2) using Global Climate Model data to adjust hydrological inputs driving 2D hydraulic models to develop climate change flood hazard maps.These tools provide outputs to meet different needs, and results may sometimes invoke further questions. For example: how can an extreme climate scenario produce lower flood risk than a conservative one? Why may adjacent postcodes' flood risk differ? We will explore the challenges associated with interpreting these results and the potential implications for the re/insurance industry.

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The future economic costs of climate change: A preliminary perspective from the insurance industry

IOP Conference Series Earth and Environmental Science ◽

10.1088/1755-1307/6/52/522010 ◽

2009 ◽

Vol 6 (52) ◽

pp. 522010

Author(s):

Andrew Dlugolecki

Keyword(s):

Climate Change ◽

Insurance Industry ◽

Economic Costs ◽

The Future

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Awareness of climate risks and opportunities: empirical evidence on determinants and value from the U.S. and European insurance industry

The Geneva Papers on Risk and Insurance Issues and Practice ◽

10.1057/s41288-021-00227-5 ◽

2021 ◽

Author(s):

Nadine Gatzert ◽

Philipp Reichel

Keyword(s):

Climate Change ◽

Fixed Effects ◽

Insurance Industry ◽

Insurance Companies ◽

Fixed Effects Model ◽

Climate Risks ◽

European Insurance ◽

Value Effect ◽

Reporting Data ◽

The U.S

AbstractIn this paper, we study the awareness of European and U.S. insurance companies of climate-related risks and opportunities using a respective indicator from the Refinitiv Eikon database that uses reporting data. Based on this, we examine the determinants and value of the awareness of business risks and opportunities resulting from climate change, which, to the best of our knowledge, has not been done so far, despite its increasing and specific relevance for the insurance industry. We use a logistic regression analysis as well as a linear fixed effects model for a 10-year period from 2009 to 2018. Our results show that larger European insurers are significantly more likely to exhibit such awareness. When controlling for subsectors, property & casualty insurers tend to be aware of the risks and opportunities resulting from climate change. Moreover, when using the linear fixed effects model, we find a statistically significant positive value effect on Tobin’s Q.

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Modelling the Ruin of Forests under Climate Hazards

10.5194/esd-2020-78 ◽

2020 ◽

Author(s):

Pascal Yiou ◽

Nicolas Viovy

Keyword(s):

Climate Change ◽

Insurance Industry ◽

Probability Distributions ◽

Physiological Parameters ◽

Adaptation To Climate Change ◽

Average Growth ◽

Monte Carlo Experiments ◽

Climate Hazards ◽

Hazard Parameters ◽

Climate Events

Abstract. Estimating the risk of collapse of forests due to extreme climate events is one of the challenges of adaptation to climate change. We adapt a concept from ruin theory, which is widespread in econometrics or the insurance industry, to design a growth/ruin model for trees, under climate hazards that can jeopardize their growth. This model is an elaboration of a classical Cramer-Lundberg ruin model that is used in the insurance industry. The model accounts for the interactions between physiological parameters of trees and the occurrence of climate hazards. The physiological parameters describe interannual growth rates and how trees react to hazards. The hazard parameters describe the probability distributions of occurrence and intensity of climate events. We focus on a drought/heatwave hazard. The goal of the paper is to determine the dependence of ruin and average growth probability distributions as a function of physiological and hazard parameters. From extensive Monte Carlo experiments, we show the existence of a threshold on the frequency of hazards beyond which forest ruin becomes certain in a centennial horizon. We also detect a small effect of strategies to cope with hazards. This paper is a proof-of-concept to quantify collapse (of forests) under climate change.

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