Karen Clark & Company (KCC) has announced the launch of complete stochastic climate-conditioned catalogs for the weather-related perils most impacted by climate change, hurricanes, floods, and wildfires.
There are five associated climate catalogs for each peril, reflecting climate projections out to 2025, 2030, and 2050.
Additionally, there are three separate views for 2050, representing alternative emissions scenarios provided by the Intergovernmental Panel on Climate Change (IPCC).
“Last year, the IPCC released its Sixth Assessment Report (AR6),” said Dr. Daniel Ward, KCC Director, Model Development.
“The scientific consensus is global warming is impacting hurricanes, floods, and wildfires, and for the first time in AR6, the scientific community has indicated high confidence around projections of frequency and severity. Now scientists have the information required to project future activity and losses.”
KCC’s team of scientists have undertaken extensive research and detailed analyses on how warming sea and air temperatures are impacting the frequency and severity of events, which includes their future loss potential for the insurance and reinsurance industry.
Moreover, the KCC Reference Models also incorporate the impacts of climate change on current losses.
“Our clients are already using this valuable information for strategic planning and ESG reporting,” said Christopher Mossey, KCC Vice President, Business Development. “The KCC numbers inform (re)insurers not only of the potential loss increases, but also changes in the shape of their Exceedance Probability (EP) curves. For example, for a particular scenario, the PML may go up by 10 percent while the lower return periods increase by 20 percent or more. This is particularly important for reinsurance purchasing and pricing.”
“Climate change is increasing the chances of $20, $30, and $40 billion industry losses because in general events are becoming more severe,” added Dr. Ward. “For example, climate changes is leading to more intense hurricanes and an increasing proportion of major—Category 3, 4, and 5—storms. Wildfires are becoming more frequent and burning larger areas due to the increasing Vapor Pressure Deficit (VPD). Scientific research as well as recent experience have confirmed these trends.”
The company noted that the the KCC climate conditioned catalogs will be updated each year to stay current with the science and atmospheric changes.
“This is yet another example of how KCC modeling experts stay at the forefront of knowledge to make sure our clients can leverage the most current science,” said Karen Clark, KCC CEO.
“These future views of risk are efficient for our clients to use and keep them ahead of the curve on requirements from their own internal and external stakeholders, including investors and regulators.”