Nat Cat Risks Aggravated by Persistent Extreme Weather Conditions: Munich Re

March 13, 2015

Munich Re has published a report, which notes that “over the past years, persistent extreme weather conditions have triggered severe natural catastrophes and caused losses in the billion range.”

In addition the world’s largest reinsurer said: “There are a growing number of scientific studies that suggest an increase in quasi-stationary weather patterns and their correlation with the considerable rise in temperature in the Arctic due to global warming.” The report specifically referred to is the “Topics Geo 2014” publication, which provides an “in-depth analyses and vast trove of data on the natural catastrophes of the past year.”

These “persistent weather patterns” can form in both winter and summer. When they develop in the winter months they are caused by “outbreaks of Arctic cold-air masses in mid-latitudes over several weeks,” which can “inflict high losses regionally. In summer, stationary high- or low-pressure systems can produce heat/drought or precipitation/flooding.”

The report concluded that “such weather patterns, some persisting for weeks, accounted for several weather-related natural catastrophes in 2014. These included the heavy winter snowfalls and ice in many regions of the USA incurring losses in the billions, and the windstorms and floods in Great Britain in February.

“The generally consistent pattern of the jet stream over the eastern Pacific, North America and North Atlantic produced the frosty winter in the USA, yet a very mild winter in Europe. In its wake, twelve major winter storms swept over Great Britain and Ireland from December 2013 to mid-February 2014, also causing severe flooding.”

North American overall losses from the cold winter are “in the vicinity of $4 billion and insured losses of $2.3 billion. Flooding in Great Britain incurred an overall loss of $1.5 billion, of which $1.1 billion was insured.

“The year’s costliest natural catastrophe for the insurance sector, the snow storms in Japan (overall loss of $5.9 billion, insured losses of $3.1 billion) was also attributable to the altered atmospheric circulation patterns in the northern hemisphere described above.

According to Peter Höppe, Head of Geo Risks Research at Munich Re, “the persistent weather patterns are caused by uncommonly stationary waves of the jet stream, a band of strong, high-altitude winds, that separate the cold Arctic and warm subtropical air masses. ‘Troughs’ and ‘ridges’ of the jet stream bulging to the south or north, are responsible for events such as the long winter in North America in 2014. But persistent heavy rainfall or heatwaves in the summer months can also be traced back to the phenomenon.”

Munich Re noted that due to these findings “the scientific community is engaging in intense discussion of whether climate change, and particularly the extremely pronounced warming in the Arctic, is responsible for these altered weather patterns.” Höppe stated: “It is not yet possible to produce causal proof, but there is a logical chain of indices.”

The report points out that “new research sees the warming in the Arctic as an important factor in the increasing and persisting cold-air outbreaks towards the south, as over North America and Asia in 2014. A study of the Potsdam Institute for Climate Impact Research also establishes a correlation between weather extremes in summer with the accelerated melting of ice in the Arctic. Flooding in Europe (1997, 2002, 2013) or heatwaves in North America (1983, 1984, 2011, 2012) merit mention here.”

In addition to the longer-term trends and the natural catastrophes of 2014, Topics Geo 2014 also addresses the use of social networks for disaster relief and assessing losses from natural catastrophes.

“If we can use information from social media more effectively, it will open up entirely new perspectives for crisis and catastrophe management. Faster and more precise loss estimates will become possible for the insurance industry, in future, if this information could be used even more systematically,” stated Torsten Jeworrek, Munich Re’s Reinsurance CEO.

The findings would seem to run counter to expectations, as 2014 was the third year in a row when natural catastrophe losses remained below the long-term average. According to Munich Re’s figures, “overall losses from natural catastrophes totaled $110 billion, compared with average losses of $190 billion from the ten previous years. Insured losses came to about $31 billion (average loss, $58 billion). Although 7,700 people lost their lives in natural catastrophes, the number was significantly lower than average, roughly at the level last seen in 1984 (then around 7,000).”

Jeworrek warned, however, that it “would be wrong to conclude any trend reversal based on the last few years. The loss trend of the past decades is clearly upwards, primarily driven by the rise in exposed values.”

Source: Munich Re

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