The AAIS Pulse newsmagazine recently featured a discussion with renowned Research Scientist and hurricane expert Phil Klotzbach, Ph. D., from the Department of Atmospheric Science at Colorado State University. He joined AAIS Chief Pricing Actuary Michael Payne to cover a wide array of topics including global warming fact and fiction, changes in severe weather patterns, risk model accuracy, 2022's climate outlook, and much more.
Dr. Klotzbach says climate change is happening, but slowly. Still, just a small change can have a significant impact. Carbon dioxide is up 50 percent over the last 140 years and global temperatures have risen about eight- or nine-tenths of a degree Celsius. “It doesn't seem like that big a deal, but it's how that overall temperature increase alters the extremes,” specifically, the severity of hurricanes caused by rising sea levels. He also pointed to warmer air leading to more rainfall, meaning an increase in flood risk. Conversely, drier seasons are triggering more severe wildfires.
As far as insurers are concerned, much of the impact from storms is caused not by higher quantity, but by an increase in severity in areas that have been more developed over time (e.g., Miami). Dr. Klotzbach says population shifts away from storm-prone areas aren’t likely because we have much better knowledge today on how to prevent damage from storms. In hurricane areas, it’s about being proactive and building “safer and smarter.” The role insurance carriers can play is to help vet new developments being built to code.
With his background in science and math disciplines, Dr. Klotzbach discussed the importance of models. He explained that models are becoming more accurate in the short-term, especially as predicators of insurance pricing. However, long-term (i.e., five-year) models remain less useful. “Even if storms don’t change at all … if we get some of these historical hurricanes that we've seen in the past … damage is significant.”
Click on the video above to watch the full conversation and all the other insightful segments in our AAIS Pulse video library.