http://www.springerlink.com/content/11n0524t1kg41400/fulltext.pdfThe Impact of Socio-economics and Climate Change on Tropical Cyclone Losses in the USAAbstract: ....However, it is also thought that the rise in losses is caused by increasing frequency of severe cyclones resulting from climate change, whether due to natural variability or as a result of human activity.
Introduction:
Our interest focuses on distinguishing between the signal due to socio-economic changes and the signal due to climate-related storm intensity from storm losses. This will help to understand better what is behind the observed increase in economic losses due to tropical cyclones.
We expanded on the Pielke et al. (2008) approach in Schmidt et al. (2008), and noted a positive short-term trend for the period 1971–2005 that can at least be interpreted as a climate variability impact. Based on this, we advanced the premise that, if the losses are affected by natural climate fluctuations, they are also likely to be affected by additional global warming due to anthropogenic climate change.
The regression results can be interpreted as follows:
whereas a 1% increase in capital stock index in the region affected by the storm produces a 0.44% increase in loss, a 1% increase in wind speed produces a 2.8% increase. In other words, storm loss is far more elastic in respect of changes in wind speed than changes in capital stock index.
The 27% increase in the current ‘‘warm phase’’ is therefore well above the long-term average. Whether this is a sign of a change in the long-term trend is uncertain because the increase will be influenced by the further development of the on-going ‘‘warm phase’’.
Conclusion (pt.A):
The results show that, historically, the increase in losses due to socioeconomic changes was approximately three times higher than that due to climate-induced changes.
We therefore regard our results as being an indication only of the extent to which socio-economic and climate changes account for the increase in losses. Both studies confirm the consensus reached in May 2006 at the international workshop in Hohenkammer attended by leading experts on climate change and natural catastrophe losses (see Table 6).
Table 6: Consensus and recommendations of the international workshop held at Hohenkammer in Germany on 25 and 26 May 2006 and attended by leading experts on climate change and natural catastrophe losses (source: Bouwer et al. 2007, supporting online material:
www.sciencemag.org/cgi/content/full/318/5851/753/DC1)
Consensus (unanimous) statements of the workshop participants:
1.
Climate change is real, and has a significant human component related to greenhouse gases.2. Direct economic losses of global disasters have increased in recent decades, with particularly large increases since the 1980s.
3. The increases in disaster losses primarily result from weather-related events, in particular storms and floods.
4. Climate change and variability are factors which influence disaster trends.
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.
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12. For future decades, the IPCC (2001) expects there to be increases in the frequency and/or intensity of some extreme events as a result of anthropogenic climate change. In the absence of disaster reduction measures, such increases will cause a further rise in losses.
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Conclusion (pt.B):
Seen from the insurance industry’s perspective, the loss evolution and the principal factors influencing it can be summarised as follows:
rising loss figures due to socioeconomic developments do not generally cause problems for insurers, since the linear nature of the increase in premiums and sums insured (i.e. capital stock) ensures that the effective loss ratio remains constant.
However, this does not apply to increases driven by storm intensity. To prevent rising loss ratios, the premium would have to be recalculated to take account of the changes in the underlying parameters. Without this, the insurer would face growing losses.
We believe that this paper’s findings on the role climate-related change plays in the increased losses confirms that insurance industry models should take this factor into account (see also Faust 2006).
