Stormy Weather Ahead?

After a hefty Christmas break my next sub-topic will be weather.  In recent years it has become evident that climate change is having a knock-on affect on weather.  Primarily it has been noted that the frequency and debatably the magnitude of hydro meteorological events in particular is being increased due to changes in temperature. 

A mere few months ago did we witness the most powerful typhoon ever recorded.  Typhoon Haiyan hit the Philippines, a mighty category 5, flattening homes, schools and hospitals along its path of destruction and leaving a death toll of over 5,000. In addition, changing temperatures may also have implications for cyclical events such as El Niño and La Niña.  It has been suggested that increased intensity and frequency of the El Niño and La Niña events (which now occur every two to three years) in recent decades is a result of warmer sea surface temperatures and thus a product of global warming.

Terrestrially increased temperatures generate drier and hotter weather conditions, initiating droughts and wildfires. Increased temperatures have also lead to an increase in the speed at which the polar ice caps are melting, which arguably will result in rising sea levels and the flooding of low-lying land throughout the world.

 How will industries such as insurance react to these increasingly frequent events, and how have they in the past?  In 2011, property/casualty insurers were exposed to over $100 billion dollars in global natural disaster related losses, with over 50% of those losses stemming from severe storms, tornadoes, flooding, and wildfires alone.  With the latter few paragraphs in mind, it is clear this value is only set to increase, seeing great potential for conflict though hopefully breeding collaboration.

Here’s a nice document that sums up the insurance industries response to climate change, focusing on the challenges faced, their impact on society and how to move forward.