A project commissioned by the Association of British Insurers
Warming temperatures are expected to influence the pattern and intensity of rainfall, winds and storms in the future. The Association of British Insurers asked the Met Office and AIR Worldwide (catastrophe modelling experts) to assess the financial impacts of climate change, including changes to:
Climate change is a major consideration for insurance companies providing cover for weather-related losses.
Understanding how future claim levels may change is essential for the insurance industry to plan key activities:
Although there is considerable uncertainty over the exact extent of changes in our climate, the industry must assess the potential impacts to allow a controlled approach to risk.
We created a series of climate scenarios based on the current state-of-the-art climate model output, as well as a diverse range of published scientific research and data. The scenarios were then used by AIR Worldwide to adjust their catastrophe models - providing a unique insight into relationships between climate change and potential financial risk impacts. The Met Office Hadley Centre also provided updates to key science questions on important related issues.
We found the following relationships between climactic events and increasing global temperatures, in both in Great Britain and China:
As a result, the study focused on scenarios of variations in position of the storm track for changes to future windstorm, and illustrative scenarios of changes in typhoon intensity.
Significant increases in insured risk can be expected across all the key measures. Key results, excluding GDP growth (growth adjusted losses were higher in most cases), include:
Significant increases in insured risk due to typhoons can be expected across all the key measures. Key results, excluding GDP growth (growth adjusted losses were higher in most cases), include:
By combining expert knowledge in the fields of climate and actuarial science, this report provides a detailed analysis relating climate change to its potential impact on insurers. The impacts of these forecasts will have considerable impact on:
There are a number of variables involved in the research, however, which means there are inevitably limitations to the information provided. Some risks, such as sea-level rises, were not included in the financial analysis.