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GIRO 2007 - Latest Science

Climate Change is a rapidly developing area of scientific investigation. One of our aims on the Wiki site will be to link to the latest areas of research which could impact on non-life insurance companies.

In contrast to the sceptics viewpoints, much of the latest research highlights the issue described above, which is that the IPCC consensus process may underestimate the extreme/tail risk (which is often the part of the risk curve of most relevance to non-life insurers) which in turn implies that policy makers are making decisions (for example on disaster recovery plans or on mitigation requirement) which underestimate the probability of catastrophes.

As some examples, some of which have involved members of our Working Party:

Ice sheets are melting fast

http://www.lloyds.com/360

Jim Hanson and his team at NASA GIS have suggested that “albedo flipping” and non-linear feedbacks make a collapse of the Greenland and West Antarctica Ice sheets more plausible on shorter timescales than the IPCC AR4 suggests; this brings with it the need to consider the risk that by 2100 sea levels might have risen by several meters. This theme was highlighted in an article in the 2007 report by Lloyd’s on “Rapid Climate Change” (which was edited by Trevor Maynard - the Chair of our Working Party).

Models miss extremes

http://www.actuaries.org.uk/files/pdf/library/harrison_climatechange.pdf

The Environmental Research Group, chaired by Nick Silver (a member of our Working Party), commissioned a piece of work by Dr Stephen Harrison which shows that climate models (like actuarial ones) have theoretical limitations and parameter uncertainty. The current models are a great achievement of modern reductionist science but they do not model certain “emergent” features which are fundamental to how the climate works; for instance the timing and structure of El Nino events. As such they may underestimate the risk of extreme behaviour, particularly at a regional level.

Major hurricanes are more likely to make landfall

http://pubs.giss.nasa.gov/authors/thall.html

Recent work by Kerry Emanuel suggests that hurricanes will continue to grow in average strength. His model uses General Circulation Models to simulate storms from fundamental physics. The model can therefore generate many pseudo years of storms and is not subject to the data shortages that plague statistical approaches. The models predict an increase in frequency in the North Atlantic, but notably also an increase in frequency of landfalls. The result for frequency is in line with recent breakthroughs in statistical modelling; for example the work of Tim Hall (NASA) and Steve Jewson (RMS) – a member of our Working Party; they have built a storm track model from the historical record that can produce pseudo storms. They conclude that: frequency increases in the North Atlantic; Florida and the Gulf of Mexico appear to bear the brunt of climate change impacts; there is a significant increase in a double event probability; and storm track appear to be different in a warmer world.

Economic losses are multiplied for large scale catastrophes

Work by Stephan Hallegate has used Kerry Emanuel’s model, and Pielke/Landsea’s renormalized loss data to investigate the economic impacts of major catastrophes. He finds that a 10% increase in Potential Destructiveness increases losses by 54% a highly non linear result. For Small catastrophes the economic responses act to offset losses (so the overall economic impact is dampened). This is because people have savings that they ordinarily don’t spend, but a small catastrophe stimulates economic activity. For large catastrophes the economic losses act to magnify overall losses. This is because people’s spare funds are used up very quickly and then negative impacts set in (such as crime, lost productivity, lost tax revenue, loss of jobs etc). The impact of social feedbacks is a growing field and it appears can amplify losses.

Abrupt climate change

http://www.pik-potsdam.de/%7Estefan/Publications/Book_chapters/Rahmstorf_EQS_2006.pdf

Abrupt climate change is a sudden, dramatic departure from the prevailing conditions. The technical definition is “when the climate system is forced to cross some threshold, triggering a transition to a new state at a rate determined by the climate system itself and faster than the cause”. Thus even slow forcing can trigger an abrupt change. A good analogy is to consider a light switch, and gently applying pressure. Nothing happens until one pushes with enough force. Then the switch clicks and the light comes on. Abrupt climate change can be driven by changes in ocean currents. Another possible cause of abrupt climate change might be significant release of underground methane as the Siberian permafrost thaws. Methane is a more powerful and faster-acting greenhouse gas than carbon dioxide. Stefan Rahmstorf continues to monitor and investigate changes in this circulation

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