Insurers adapt to extreme weather

Times Online (UK): The scientific jury may still be out on the extent to which recent weather catastrophes are linked to global warming, but the insurance industry is taking a more practical response. The spate of floods, droughts and hurricanes has left a huge financial cost as well as a human one and highlighted the inadequacy of attitudes to risk and weather. “Hurricane Katrina was the big wake-up call,” says Professor Julia Slingo, director of climate change at the National Centre for Atmospheric Science at the University of Reading. “It had a significant impact on the industry and the threat of Atlantic hurricanes remains a big worry.”

The financial fallout of Katrina is estimated at $125 billion (£63 billion). With the likelihood of more disasters, developing new products that take climate change into account is one of the biggest challenges the industry faces. Because the effects of global warming are so random, it is difficult to assess risk accurately. Take India, for example: overall summer rainfall figures show little sign of increasing, yet some areas have become more prone to flooding and are therefore at greater risk.

While scientists tend to present global warming findings on a long-term, national or international basis, insurers want the risk measured locally so that they can develop appropriate products. The industry is working with academics to solve the problem. In the largest collaboration, 15 international universities, including Cambridge, Exeter and Durham, have formed a partnership with the insurance industry — the Willis Research Network. Under the initiative the industry funds leading academics, including Professor Slingo, to evaluate the impact, seve-rity and frequency of catastrophes. Last year it began using technology in Japan to try more accurately to predict typhoons and hurricanes….

Rainfall from Hurricane Katrina, NASA, Wikimedia Commons