Much of the media attention on climate change focuses on the meteorological effects, such as warmer temperatures, melting icecaps and rising oceans.
Of more importance to the insurance industry are questions that receive far less attention, for example:
How will these trends impact catastrophe reinsurance contracts and related securities?
Will hurricanes be more frequent, more severe or both?
Will insurance losses be greater?
A new report from Karen Clark & Company (KCC), titled “Climate Change and Hurricane Loss: Perspectives for Investors,” looks at more than 100 years of historical hurricane data to provide a basic perspective on the frequency and severity of insurance loss for investors. The report also examines the challenges of predicting hurricanes in the short term and offers perspective for long-term investors in the catastrophe market.
KCC’s report provides context for investors as well as evidence that climate change has had no measurable effect on the North Atlantic hurricanes that are most often responsible for CAT market losses. According to the Intergovernmental Panel on Climate Change, as cited in KCC’s report, loss levels have gone up over time primarily due to increases in the value of buildings now standing in the path of hurricanes.