John McAneneyRisk FrontiersMacquarie UniversitySydney, NSW

John McAneneyRisk FrontiersMacquarie UniversitySydney, NSW

Risk Frontiers

An independent and local research capability to:

• help insurers and reinsurers better understand and price natural hazard risks in the Asia-Pacific region

• develop Probabilistic Catastrophe Models• undertake research in natural hazards• undertake post-event reconnaissance• increase public awareness of natural

perils

Global Climate Change but -Global Climate Change but -

• Arguments over the scale and speed of warming in the future

• Beyond temperature and sea level rise models have little

useful yet to say about regional implications

• Rainfall extremes poorly captured in models

• Models can’t resolve other severe weather phenomena like

floods, storms, cyclones, etc.

• Risk is not simply a function of climate

Conclusions

• What we build, how we build, where we build are the most important factors in shaping future disasters

• Societal factors drive the long-term increases in disaster losses

• Climate variability and change also influence losses

• Many aspects of risk assessment are contested –from the science of extreme weather to the representations of knowledge in catastrophe models

• Understanding vulnerability and exposure is therefore of critical importance

Source: Swiss Re sigma Catastrophe database

1992:Hurricane Andrew,USD 22 bn

1999:Storms Lothar/Martin,USD 10 bn

2004:Hurricanes Charley, Frances, Ivan, Jeanne,USD 29 bn

2005:Hurricanes Katrina, Rita, Wilma,USD 65 bn

Insured losses from disasters have Insured losses from disasters have been increasingbeen increasing

USD

mill

ions

(200

5 $)

Media Interest: Number of articles in the Washington Post and New York Times discussing

the link between hurricanes and global climate change

(From Storm World: Hurricanes, Politics and the Battle over Global Warming by Chris Mooney)

Annual Hurricane DamageAnnual Hurricane Damage

3/16/2010

US Catastrophe Loss and Numbers of Claims

• All Catastrophes 2004 $27.5 B 3.4 million• Hurricane Claims 2004 $22.9 B 2.3 million

• All Catastrophes 2005 $61.5 B 4.4 million• Hurricane Claims 2005 $57.5 B 3.4 million

• All Catastrophes 2006 $ 9.0 B 2.3 million• Hurricane Claims 2006 0 0

• All Catastrophes 2007 $ 6.7 B 1.2 million• Hurricane Claims 0 0

• All Catastrophes 2008 $26.0 B 4.0 million• Hurricane Claims 2008 $14.1 B 1.7 million

“Important New Paper on North Atlantic Hurricanes”

as posted by rogerpielkejr.blogspot.com

A very important paper was published today by Chen et al. in theopen-access journal Natural Hazards and Earth Systems Science (of the EGU) titled, "Quantifying changes of wind speed distributions in the historical record of Atlantic tropical cyclones". The paper should go some way toward resolving disputes about the behavior of hurricanes in the North Atlantic, as it provides compelling evidence of a bias in the historical record due to observational practices.

For instance, the paper finds that no Category 5 hurricane was observed in the North Atlantic until 1924, observing that "if the average frequency of Category 5 TCs during 1924–2008 were to be representative of the entire record, there should have been about 28 Category 5 TCs during the period 1851– 1923."

The paper also provides (once again) strong confirming evidence supporting our work on the relative role of societal changes in the economic record of U.S. hurricane losses.

www.nat-hazards-earth-syst-sci.net/9/1749/2009/

Atlantic basin hurricane data –Wind speed

Atlantic basin hurricane tracks (Category 1-5) during 1851-2006

Difference of wind speed distributions between the early historical period (1851-1946) and the recent six decades.

- Early historical records significantly underestimate the frequency of Category 4-5 winds.

- Wind speed distributions over the past two, four and six decades display little systematic changes.

Damage trend canDamage trend can’’t be due to storm t be due to storm behavior alonebehavior alone

Damage to property and other assets is linked to landfalling events.

For the six decades since 1947, no sustained upward trends in- Average annual count of

landfalling segments- Mean landfalling wind

speeds

This contrasts with the dramatic increases in total economic and insured losses, suggesting the losses must be attributed to factors other than wind speed alone.

Power Dissipation Index

USA: Coastal development

Losses increasing?

Miami Beach 1926 Miami Beach 2006

Wendler Collection Joel Gratz © 2006

Florida Coastal PopulationFlorida Coastal Population

0

2

4

6

8

10

12

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

1900 to 19901900 to 1990

Year

Pop

ulat

ion

(Mill

ions

)P

opul

atio

n (M

illio

ns)

(Source: Pielke Jr & Landsea - Weather and Forecasting, 1998)15 million today!

Hurricane Damage if landfall in 2005Hurricane Damage if landfall in 2005

Normalized US Weather Disasters

• Raw damages are increasing

• Normalized damages show no trend, consistent with the lack of trend in landfalling frequencies and windspeeds

• Increases in inflation, wealth, and development along the coastline account for increasing damages.

Australian Losses - ICA Natural Disaster Event ListAustralian Losses - ICA Natural Disaster Event List

• Insurance Council of Australia database of insuredlosses since 1967

• Normalised past losses by accounting for changes in– Inflation– Population– Wealth– Building Codes

• Estimate losses as if events took place in 2006

Original Annual Aggregate Losses (July 1 – June 30)Original Annual Aggregate Losses (July 1 – June 30)

Original annual aggregate insured losses (AUD$ million) for weather-related events in the ICA Disaster List for years beginning 1 July.

TC Tracy

Sydney Hail

Number of occupied dwellings in the Sydney UCLNumber of occupied dwellings in the Sydney UCL

600000

700000

800000

900000

1000000

1100000

1200000

1300000

1400000

1966 1971 1976 1981 1986 1991 1996 2001 2006

Year

Num

ber o

f Occ

upie

d D

wel

lings

Average nominal new dwelling value (AUD$ thousands) for WAAverage nominal new dwelling value (AUD$ thousands) for WA

0

20

40

60

80

100

120

140

160

180

200

1967 1972 1977 1982 1987 1992 1997 2002

Year

Ave

rage

Nom

inal

Val

ue(A

UD

$ th

ousa

nds)

Gold Coast – Tweed Heads Total DwellingsGold Coast – Tweed Heads Total Dwellings

Source: ABS

0

50

100

150

200

250

1966 1976 1986 1996 2006

Year

Tota

l Dw

ellin

gs ('

000s

)

Normalised Annual Aggregate Losses (July 1 – June 30)Normalised Annual Aggregate Losses (July 1 – June 30)

Brisbane Flood

TC Tracy

Ash Wednesday

Fires

Sydney Flood & Brisbane Hail

Sydney Hail

Sydney Hail

TC Tracy - 1974TC Tracy - 1974

• Original loss = $200M

– Dwelling number factor ~ 3– Nominal dwelling value factor ~13

– (1974: ~$18.5K; 2006: ~ $240K)– All losses attributed to wind or wind-driven rain– Current construction all post-1981– Building code factor ~ 0.5

• Current loss ~ $3.6 billion

• This may be slightly high as building code regulations were introduced in Darwin earlier than 1981

• Original loss = $200M

– Dwelling number factor ~ 3– Nominal dwelling value factor ~13

– (1974: ~$18.5K; 2006: ~ $240K)– All losses attributed to wind or wind-driven rain– Current construction all post-1981– Building code factor ~ 0.5

• Current loss ~ $3.6 billion

• This may be slightly high as building code regulations were introduced in Darwin earlier than 1981

There have been bushfires before!

0

500

1000

1500

2000

2500

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Orig

inal

HE

Normalised by building numbers

0

500

1000

1500

2000

2500

3000

3500

4000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Nor

mal

ised

HE

(200

8)(S

tate

Dw

ellin

g N

umbe

rs)

Bushfire fatalities

0

20

40

60

80

100

120

140

160

180

200

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Orig

inal

Fat

aliti

es

Fatalities normalised by population

0

50

100

150

200

250

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Nor

mal

ised

Fat

aliti

es (2

008)

(Sta

te P

opul

atio

n)

Ratio of bushfire deaths to property losses

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Rat

io o

f Nor

mal

ised

Fat

aliti

esto

Nor

mal

ised

HE

(Yea

rs w

here

HE

> 50

0)

Original annual flood losses in Europefrom major flood disasters

(Barrredo, J. 2009 Nat Hazards - Earth Syst. Sci.)

Major European Floods normalised to 2006 values

(Barredo, J. 2009 Nat Hazards Earth Syst. Sci.)

•Co-sponsors: US NSF, Munich Re, GKSS Institute forCoastal Research, Tyndall Centre for Climate ChangeResearch

•32 participants from 16 countries

•24 background “white papers”

•Summary consensus report

•Consistent with IPCC WGI

HohenkammerHohenkammer Workshop May, 2006Workshop May, 2006

•Analyses of long-term records of disaster losses indicate that societal change and economic development are the principal factors responsible for the documented increasing losses to date.

•Because of issues related to data quality, thestochastic nature of extreme event impacts, length of time series, and various societal factors present in the disaster loss record, it is still not possible to determine the portion of the increase in damages that might be attributed to climate change due to GHG emissions

•In the near future the quantitative link (attribution) of trends in storm and flood losses to climate changes related to GHG emissions is unlikely to be answered unequivocally.

HohenkammerHohenkammer Workshop May, 2006Workshop May, 2006

Stern Report• Robert Muir-Wood, head of research at Risk Management Solutions,

said the Stern report misquoted his work to suggest a firm link between global warming and the frequency and severity of disasters such as floods and hurricanes.

• The Stern report, citing Muir-Wood, said: “New analysis based on insurance industry data has shown that weather-related catastrophe losses have increased by 2% each year since the 1970s over and above changes in wealth, inflation and population growth/movement. If this trend continued or intensified with rising global temperatures, losses from extreme weather could reach 0.5%-1% of world GDP by the middle of the century.”

• Muir-Wood said his research showed no such thing and accused Stern of “going far beyond what was an acceptable extrapolation of the evidence”.

• The criticism is among the strongest made of the Stern report, which, since its publication in 2006, has influenced policy, including green taxes.

Adaptation MeasuresAdaptation Measures

• Efforts to reduce society’s vulnerability to current & future extremes

• Improved wind standards best example• Bushfire: restrictions based on distance to forest• Flood: limit construction on floodplains

• Making the hard decisions we have mostly avoided ‘til now

Victoria, Black Saturday, 2009

Don’t Expect To Get Cheap Insurance

Good American [Australian] land planning principles are based upon “property owners’ right to build what they want, and the government’s obligation to bail them out afterward.”(Washington Post: September 21.)