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The Insurance Industry and Climate Change

This morning, AIR Worldwide, in collaboration with the the U.K. Met Office and the Association of British Insurers (ABI), released their findings on the financial implications of climate change to the insurance industry.

The report, “Financial Risks of Climate Change,” focuses on insured risks in both the U.K and China from dominant natural hazards in those areas, including inland flooding, winter windstorms and typhoons.

Results from the study include:

  • The average annual insured inland flood losses in Great Britain could rise by 14 percent assuming a global temperature rise of 4°C (39 degrees Fahrenheit). Within Great Britain, the results vary by region (increases range from less than 10 percent to nearly 30 percent).
  • The insured inland flood loss in Great Britain occurring on average once every 100 years could rise by 30 percent. The insured inland flood loss occurring on average once every 200 years could rise by 32 percent. In both cases, the estimates assume a global temperature rise of 4°C.
  • The average annual insured losses from typhoons affecting China could increase by 32 percent; the 100-year loss could increase by 9 percent, and the 200-year loss could increase by 17 percent. In all cases, the estimates assume a global temperature rise of 4°C.The average annual insured inland flood losses in Great Britain could rise by 14 percent assuming a global temperature rise of 4°C. Within Great Britain, the results vary by region (increases range from less than 10 percent to nearly 30 percent).

“The earth’s climate system is constantly changing,” said Dr. Peter Dailey, assistant vice president and director of atmospheric science at AIR Worldwide. “Not only does a change to any component of the system influence the risk from natural catastrophes, but the interactions between components bring about an inherent uncertainty surrounding how climate will evolve in the future. By conditioning our models on future climate scenarios developed by leading climate researchers at the Met Office, the study we have conducted on behalf of the ABI advances our understanding of the relationship between these complex climate relationships and insured risk.”

The research brings together unique climate model projections with state-of-the-art catastrophe models. And as we’ve recently seen with Typhoon Ketsana, which demolished parts of China, the Philippines, Cambodia, Vietnam and Laos and killed almost 700 and caused more than $1 billion in damage — research in this area is greatly needed. Nothing can stop Mother Nature, but cat models can help prepare for her wrath.
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Philippines Braces for Third Storm in a Month

The Philippine islands are preparing for yet another storm as Typhoon Lupit heads towards the region. The storm is packing winds of 109 miles per hour and is expected to hit the northern islands Thursday.

This is bad timing for the Philippines. On September 26, the area was hit with Typhoon Ketsana, which killed almost 500 and injuring more than 600. And just one week later, on October 3, Typhoon Parma struck the Philippines causing $250 million in damage and killing close to 400.

Now, the government is moving fast to prevent even more deaths by evacuating residents from mudslide-prone areas. The previous two storms were blamed for the destruction of the homes of more than 7 million.

President Gloria Macapagal Arroyo has blamed extreme weather caused by climate change but her critics say the calamity was magnified by poor city planning and millions of squatters living along riverbanks and blocking waterways with their shanties. The urban poor, sources of cheap labor and votes during elections, make up for almost half of Manila’s 12 million people.

Typhoon Fengshen struck the area in June of 2008, killing 1,400 and making it the third deadliest catastrophe of that year. If Typhoon Lupit does in fact strike the Philippines with the strength it currently has, 2009 is likely to turn out to be one of the deadliest and costliest years in Philippines history.

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