Modelling the impact of climate change and weather related events. Seong Woh Choo Head of R&D and Chief Underwriting Officer

Transcription

1 Modelling the impact of climate change and weather related events Seong Woh Choo Head of R&D and Chief Underwriting Officer 1 1

2 Introduction Risk to community and insurers Climatic cycles/change affecting Australia Weather Risk projects Business initiatives 2

3 Main ideas Weather Risk Modelling Adds value Assists business and community Can make a difference 3

4 Insurance Australia Group Limited Largest General Insurer in Australia and NZ GWP in excess US$3B High market share in personal lines 4

5 IAG s R&D capability 80 analysts with diverse expertise Work with external groups Used SAS for over 20 years 5

6 Risk to community and insurers Worldwide % catastrophes were weather related 75% of economic losses 87% insured losses Losses typically caused by: Tropical cyclones/hurricanes Winter storms Hailstorms Bushfires Floods 6

7 Australian Catastrophe losses Hailstorm Sydney April 1999 Earthquake Newcastle 1989 Cyclone Tracy 1974 Hailstorm Sydney March 1990 Cyclone Wanda 1974 Bushfires Ash Wednesday 1983 Hailstorm Brisbane Jan 1985 Hailstorm Sydney Jan 1991 Hailstorm Sydney Oct 1986 Cyclone Madge 1973 Cyclone Althea 1971 Floods Sydney Nov 1984 Hailstorm Sydney Nov 1976 Hailstorm Sydney Feb 1992 Insured Losses in $Millions (2001 prices) Hailstorm Armidale Sept 1996 Bushfires Hobart 1967

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9 No: 1 - Sydney Hailstorm 1999 Australia s most costly natural disaster AU$1.7 Billion in Insured Losses Contributed 25% of IAG s 15-year total of weather related claims Approx 50,000 claims 4 times bigger than previous largest hail event 9

10 Sydney hailstorm 1999: 8cm hail 10

11 No:2- Cyclone Tracy: Darwin killed 600 injured 217 km/hr+ winds 11

12 Climate Cycles: El-Nino/La Nina 12

13 Climate Cycles 13

14 Impact of El-Nino in Australia 14

15 Impact of La-Nina in Australia 15

16 Weather Cycles 16

17 Climate Change: Global SPM 1a Temperatures have increased by 0.6 C last century with the 1990 s the warmest decade and 1998 the warmest year since 1861(instrumental record) A further C increase projected by

18 Climate Change: Australia 18

19 Climate Change Increases in temperature more intense rain and wind storms increase in coastal flooding from storm surge more intense wet and dry spells Climate change is expected to increase BOTH the frequency and severity of claims incurred 19

20 Sensitivities Hazard Windstorm Extreme temperature episodes Cause Of Change In Hazard Doubling of windspeed 2.2 C mean temperature increase 1 C mean temperature increase Resulting Change In Damage/Loss Four-fold increase in damages Increase of 5-10% in hurricane wind speeds 300-year temperature events occur every 10 years Floods 25% increase in 30 minute precipitation Flooding return period reduced from 100 years to 17 years Bushfire 1 C mean summer temperature increase Doubling of CO % increase wildfires 143% increase in catastrophic wildfires 20

21 Impact of Peak Gust Changes % Increase in Damages % increase in peak gust causes 650% increase in building damages Under 20 knots knots knots knots IAG Building claims versus peak gust speed showing disproportionate increase in claims cost from small increases in peak gust speed. 21

22 Data and Analysis Tools Data Extraction Data Management Reporting/ Summarisation Base SAS Data Exploitation DB2 Transaction based Data Daily Extracts Daily Extraction, Transformation & Loading (Using Defined Business Rules) SAS Data Warehouse External Climate Data Analysis data Data Mining Enterprise Miner Statistical and Data Analysis SAS/STAT SAS/insight Matlab Presentation/ Interpretation Base SAS Enterprise Miner Mapinfo Microsoft Excel 22

23 IAG s Storm Modelling Larger or more intense? Characteristics and behavior change? More likely? 23

24 Hail/Extreme Events Modelling 24

25 Could climate change yield a mega-storm? Possible Storm with 8cm Hail? 8cm footprint for the April 1999 Storm 25

26 How could this happen? Produced by small changes to three key parameters Wind-shear Sea surface temperature Atmospheric stability Related to climate Change? Sea surface temperature: Yes Wind Shear : Probably Atmospheric stability : Probably 26

27 Modelling collision frequencies 27

28 Business response Recognition climate change is a global phenomena Support initiatives that reduce greenhouse emissions Models add value helps business understand the impact Research continuing Working with Govt and community - Affordability - Building codes 28

29 Business response Example of initiatives Education program on sustainability Early warning broadcast on storm Recycling program with repairers 2004 target reduction of 15% on paper used 5% in fuel consumption 5% in kms of air travel 29

30 Summary Weather risk modelling is feasible Adds significant value Assists business and community You can make a difference 30

31 Thank you Questions? 31