the information contained in this document is strictly proprietary and confidential ©benfield...
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The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Hurricanes and hydro-meteorology
David CrichtonVisiting Professor, Benfield Hazard Research Centre, University College London
Visiting Professor, Middlesex University Flood Hazard Research Centre
Hon Research Fellow, University of Dundee
Fellow of the Chartered Insurance Institute
ASSAL XVII Annual MeetingLisbon, 26th April 2006
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Impact of hurricane Katrina
• Very large death toll—nearly 1500 people (the deadliest U.S. hurricane in 80 years and the third deadliest in U.S. history)
• Approximately $75 billion in damage, the costliest disaster in U.S. history.
• Approximately $75 billion in other economic impacts, especially business interruption.
Source: Michael K. Lindell and Carla S. PraterHazard Reduction & Recovery CenterTexas A&M University
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Top 10 US hurricanes for insurance losses:3 out of 10 in 20057 out of 10 since 2004
$3.4 $3.7 $4.6$6.4 $7.1 $7.5
$10.0 $10.0
$20.9
$45.0
$0
$10
$20
$30
$40
$50
$ b
illio
ns
*Estimates as of September 26, 2005 in 2005 dollars.Sources: ISO/PCS; Insurance Information Institute.
Source: Julian James, Director Worldwide Markets, Lloyd’s
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
0
50
100
150
200
250
300
350
400
90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05
Catastrophe reinsurance pricing:Falling since 2003
Guy Carpenter Rate on Line index: 1990 = 100
Sources: Guy Carpenter, September 2005Source: Julian James, Director Worldwide Markets, Lloyd’s
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Why insurance?
• Forces external risk assessment
• Financial incentives for loss reduction
• Spreads the cost globally
• Micro insurance and weather hedges
• Less dependence on aid
The greater the government regulation, the less insurance can help.
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Private insurance needs “BASIC MUD”
B Big enough “book” of business, i.e. a large enough collection of risks for a statistical spread
A Adverse selection minimised through good knowledge of each risk. S Sustainable over a number of years for various future scenarios so the
risks can be spread over time and reserves built up. I Information readily available from reliable sources about hazard,
vulnerability, exposure and claims triggers. C Cultural issues. - systems, customs and law.
M Moral and political hazard low and manageable. U Uncertainty about the potential loss.D Demand for insurance must exist (or have potential to be created)
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The Risk Triangle
RISK
Haz
ard
Vulnerability
Exposure
A Framework for Adaptation?
Source: Crichton, 2001
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The Thames in Central London
(that is, London, Ontario)
Nothing has been built in the 250 year floodplain since 1954The old flood defences remain on the left bank.
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Vulnerability is growing…
• More old people
• Lightweight building construction
• More dependence on electricity
• More underground transport and parking
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Exposure is growing…
• More people living near the coast or rivers
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Hazards are growing…
• Increase in severe rainfall events
• Rising sea levels
• Higher storm surges
• More droughts and subsidence
• Changing storm tracks
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IPCC Third Assessment Report
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Source: Hadley Centre
Global mean surface temperature 1861- 2004
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Storm Surges will become worse with rise in sea level and SST
• 3 metres (1953, England and Holland)
• 5 metres (1999, “Anatole”, Denmark)
• 8.8 metres (2005, “Katrina”, USA)
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New approaches will be needed…
• Mitigation– Reducing the carbon emissions which cause
climate change by avoiding use of fossil fuels.
• Adaptation– Making our buildings and cities more resilient
• Stopping “Maladaptation”– Rethinking what we are doing right now
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Big European Flooding events...
• 1993, Rhine, Tay
• 1994, Strathclyde
• 1995, Rhine
• 1997, Oder (Germany/Poland)
• 1998, England/Wales, Central Europe
• 1999, Danube, Denmark 5m storm surge
• 2000, UK, Switzerland, Italy
• 2001, Wisla (Poland)
• 2002, UK, Dublin, Central Europe
• 2003, Rhone, France
• 2004, Conwy, North Wales.
• 2005 Conwy (again), Carlisle, Central Europe
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Thames Barrier
Source: Crichton
Would it cope with a 5 metre storm surge?
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Managing risk
• Hazard, the event– Frequency and severity
• Exposure, the value of life and property in area affected– Land use planning controls
• Vulnerability, the extent to which life and property are affected– British Flood Insurance Claims Database
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Table: Percentage of flood victims reporting health effects from floodingPhysical Effects Mental Effects
Stiffness in joints 23 Anxiety during rain 80
Respiratory illness 21 Stress 67
Gastro-intestinal 20 Depression 56
Weight loss 20 Sleep problems 51
Skin irritations 16 Panic attacks 27
Muscle cramps 16 Anger attacks 24
High blood pressure 14 Nightmares 18
Sprains/ strains 14 Suicidal thoughts 9
No physical effects 36 No mental effects 6Source: extracts from a table produced by Professor Dennis Parker, Middlesex Flood Hazard Research Centre
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Non Structural Solutions
• Sustainable drainage methods (SUDS) • Warning schemes • Insurance• Manage development in flood hazard areas.• Water resource management• Educate public and raise awareness• Agricultural practices• Resistance, resilience, and recovery
*“SWIMWEAR”
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Cheap flood insurance used to be widely available to all UK households
• But this has increasingly enabled flood plain development – people could insure houses in flood hazard areas and get mortgages to buy them.
• People in flood hazard areas were subsidised by people in safer areas
• Only the property developers benefited.• An increasing number of properties were built in
the floodplain without adequate defences.
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Insurance is now changing
In 2002, the ABI warned that insurance would be withdrawn from flood hazard areas unless government acted to:– control floodplain development– spend more on flood defences
• Government has failed to act in England.
• The ABI announced that from 2006 insurance might no longer be available in high risk areas.
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But Scotland follows the “Insurance Template”
• Sheltered Housing 1,000 year• Hotels, hostels etc 750 year• Basements 750 year• Bungalows without skylights 500 year• Near “Flashy” rivers 500 year• All other residential 200 year
Maximum exposure for insurers to write flood risk at normal terms.
Source: Crichton
Where the risk is higher than 1 in 200 years the Statement of Principles applies
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Adaptation
One message:
Architects,Planners and Insurers should work together to help society to adapt
to climate change