A diverse range of emerging climate risks, in combination with rising asset values and population trends, are set to increase the frequency and severity of re/insured losses related to global weather events in the U.S, according to a report from ISO, a Verisk Analytics business.
ISO noted that one of the biggest climate threats to re/insurers is rising sea levels, which Verisk’s AER business has projected will dramatically increase the risk of flooding and tropical cyclones along the East Coast of the U.S over the course of the next century.
In addition to the increased frequency and magnitude of weather events, insured losses are also being exacerbated by rising asset values as the cost of properties in at-risk coastal areas becomes more expensive.
For example, ISO found that the value of properties in coastal areas of the U.S have risen by an average of 7% annually since 2008, which translates to a doubling of insurance losses every 10 years, regardless of any climate change-related effects.
At the same time, populations in coastal regions and many other at-risk areas are growing at a faster pace than others, with coastal development now representing one of the largest factors influencing hurricane risks.
Additionally, emerging climate risks will not just be limited to coastal regions. Precipitation extremes are increasing across the northeastern U.S and elsewhere, leading to a heightened risk of inland flooding, while drought is expected to intensify in some regions and put pressure on food and water supplies.
A joint AIR and AER analysis also found evidence that climate change may result in shorter, more intense winters for parts of the northeastern U.S, as well as more volatile freeze/thaw cycles and polar vortex disruptions.
However, addressing climate change is complicated by its interrelationship with economic development and the energy deficit facing many people around the world, ISO noted, particularly in emerging countries.
The report concluded that climate risk mitigation strategies must be balanced carefully against economic progress and rising standards of living using the best data and analysis available.