Anyone for insurance?
Posted by Heading Out on March 14, 2006 - 8:03pm
With the high costs that arose last year from the impact of the hurricanes, and the other unseasonable weather impacts on the country, such as the current fires in Texas and Oklahoma brought about by the drought, the insurance industry has been starting to take a look at the levels of risk that it is now getting into.
Last year, based on info that came from the industry we posted about some of the problems that companies engaged in drilling in the GOMEX were starting to encounter in insuring their rigs. All of a sudden the condition of the rig and the level of storm that it could withstand was being considered against the likelihood of it encountering a storm of that or greater magnitude. The insurers were asking, at that time, for assurances that rigs could withstand the storms, in the form of models that would validate the design strengths that were being proposed.
But there is a new issue that is beginning to concern the insurance companies. What if you are insuring the companies that might be considered causative of global warming. What happens if they get sued?
A bit of a stretch still you might thing, but insurance companies need to consider that risk, and as an article in Salon has just pointed out, they are starting to realize the problem.
Swiss Re is a reinsurance company --- a large chunk of its businesses comes from selling insurance to other insurance companies to cover their potential losses. As one might guess, Swiss Re's business took a hit in 2005, as a result of the unprecedent hurricane damage that ravaged the United States. Swiss Re is alarmed at the rate at which the financial cost of natural disasters has been rising -- doubling every 10 years, and predicted to hit $150 billion a year within a decade.And, of course, being cautious folksExecutives at Swiss Re are beginning to worry that the executives of corporations responsible for greenhouse gas emissions may ultimately be found legally liable for damage from natural disasters that result from climate change. Swiss Re has decided that it would rather not be on the hook for that kind of legal liability, especially for those corporate executives who are denying that there is any problem at all.
"So,' said Walker, 'we might go to them and say, "Since you don't think climate change is a problem, we're sure you won't mind if we exclude climate-related lawswuits and penalties from your [Directors & Officers] insurance."'"A single year of bad weather and its impact is something that insurance companies have learned to survive, but if the pattern of hurricane damage is going to be an annual event for the next decade then the whole game may be redesigned.
However there is at least one prediction that suggests that the season will be somewhat less intense than last year, with the probabilities of there being a Category 3 or greater Hurricane being
1) Entire U.S. coastline - 81% (average for last century is 52%)So maybe it won't be as bad as we may anticipate.U.S. East Coast Including Peninsula Florida - 64% (average for last century is 31%)
Gulf Coast from the Florida Panhandle westward to Brownsville - 47% (average for last century is 30%)
Above-average major hurricane landfall risk in the Caribbean
The only superstitious worry that I have is that we had that predictive movie from Fox called Oil Storm last year, and it was a bit more accurate than one might have liked - at least in setting up the problems. CNN are about to show the new version called "We Were Warned" this weekend.
Oil Storm has a very fictitious ending that we posted about at the time. Given all that has happened since, and the realities of the Gulf Coast situation, somehow I suspect that the pill won't be quite as sugar-coated this time. Ulp!
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Phil is now devoting more time to the improvement of these forecasts than I am. I am now giving more of my efforts to the global warming issue and in synthesizing my projects' many years of hurricane and typhoon studies.
If indeed the earth is warming rather suddenly, and no one is suggesting that, we'd see much risk in the Gulf. Last years very warm Surface Sea Temperatures certainly contributed to the damage. Perhaps this year will be another year of records.
Just another piece of the puzzle...
In this post, Heading Out links to Dr. William Gray's December 2005 hurricane forcast for this summer (the revised report comes out April 4). However, this winter and spring we have entered into a La Nina weather event. A recent NOAA bulletin mentioned that La Nina events usually lead to more active hurricane seasons. Check out the link.
http://www.noaanews.noaa.gov/stories2006/s2572.htm
Only time will tell whether La Nina has any effect on this year's hurricane season.
What a brilliant idea!
This would get them to put their money where their mouth is!
It's not obvious to me that these guys understand the dangers here. But maybe they do and I just don't have enough detail on their methodology. Does anyone have more information on it?
In December 2003, they predicted a 68% probability of a Cat 3-4-5 hurricane hitting the US coast. We got Charlie, Ivan, and Jeanne. (Frances was only Cat 2 in Florida, though she had hit the Bahamas as a Cat 3).
So, when they say the probability of a Cat 3-4-5 strike on the US is 81% this year (versus 69% in 2005 and 68% in 2004), you should probably quake in fear :-).
Hawaii's been socked with rain over the past few weeks. All the utility poles were knocked down by wind along a major highway yesterday. Today, a dam failed on Kauai, washing out a large section of the only highway into the area. Not to mention several houses.
They apparently had no clue the dam was in danger of failing.
It appears that reinsurance rates will be about 20% higher for the southern U.S. and offshore drilling rigs, but little changed for localities with lower exposure to storms.
It is a good reminder that our earth is less like rigid baseball and more like a very flexible and fragile water balloon that can be distorted relatively easily by the slightest of perturbations.
I am beginning to come to the conclusion that the earth is such a hopelessly complex and chaotic dynamic system that I seriously doubt we will ever succeed in developing a deterministic model that can accurately predict future conditions. I'm not saying we shouldn't try to gain a better understanding of what is going on, but on a certain level some things are literally unknowable.
You get things like raised beaches. Northern Europe is not very tectonically active so seismic activity due to readjustment is not an issue. Except perhaps on the Great Glen Fault which stirs occasionally.
However (I seem to recall) there is evidence of Submarine slumping off Norway which , in the past may have created a Tsu-Nami that hit the UK very hard.
On the other side of the coin, The south east of the UK and the low countries are sinking slowly.Polar melt will be an issue for these areas. (Thats why the Dutch love boats).
The huge ice shelf that covered northern North America caused stress changes when it melted IN THE AREAS IT PREVIOUSLY COVERED. Greenland may have some seismic activity due to the change in load, but I'd be really surprised to see any activity elsewhere -- and there just isn't that much in insurance liability in Greenland!