The Climate Change Problem

Climate change has many implications for the insurance industry. There is a consensus in the results from all the 19 major climate change models around the world that Britain will become much wetter, and this alone must increase the chances of flooding in Britain:

In addition, however:

•  sea level is rising (see figure 3)

•  storm surge heights will increase (see figure 4)

•  the frequency and severity of windstorm events will increase, according to the Hadley Centre model (although not all climate models agree with this).

•  storm tracks are changing. Atmospheric high pressure over the continent of Europe usually blocks storms from tracking over the South of England or the North of France. As winters in central Europe become milder, the blocking highs are becoming weaker or shifting to the East. When there are milder winters in central Europe , more storms track across the South of England and the North of France. Because buildings there are designed and constructed to lower standards, damage can be severe. For example the storms of October 1987, Jan uary 1990, and December 1999.

•  Changes in tidal ranges mean that the frequency and severity of extreme high water levels will increase (see figure 5).

As if all this was not enough, as will be shown later in this report, in the south east of England the land is sinking due to tectonic tilt caused by post glacial rebound in the north of Britain, which will accelerate relative sea level rise.

Rainfall in the autumn and winter is projected to increase significantly, with more frequent severe events. At the same time rainfall in the summer will reduce, but there will still be short duration extreme rainfall during thunderstorms, which will runoff faster when the ground is dry. There have been examples of this in the past, such as the Lynmouth and Boscastle disasters, and flash floods and landslides are going to become a more frequent problem in the future. (For more details see "The "Flash Floods Problem" and "The Landslide Problem" later in this report.)

With such freak events becoming more frequent, there are numerous questions being raised as to whether this is evidence of climate change.

However, it is just as important to remember that a single weather event is not clear evidence of climate change, and that looking at the longer term picture is essential.

The US fossil fuel lobby has argued that impacts of climate change will be good for business because more people will pay more for insurance, so why should insurers care?

There are two main problems with this argument. The first is that the increases in losses are unlikely to be steady and predictable. If the climate is changing, the numbers of attritional losses are likely to grow, but there will also be an increasing number of "sideswipes" due to catastrophic losses. Because the extreme events that cause catastrophic losses are rare, it is much harder to quantity the risk in terms of probability, but all the General Circulation Models built by respected scientists around the world seem to suggest that the risk is growing. In a recent letter to "Nature", Palmer and Rälsänen reported how they have made a probabilistic analysis of 19 global climate model simulations - in effect, a "poll of polls" - and have concluded for example, that winter precipitation in the UK could increase five-fold in the next 100 years.

Climate change will have major impacts across Europe, and although this report is confined to flood risks in Britain , it is worth pointing out that hail storms and windstorms will also be a problem. Underwriters should be concerned about the fact that climate change will result in winter storm tracks moving south, as happened with the very damaging storms of 1987, 1990 and 1999. Fortunately so far England and France have escaped a storm of the severity of the Braer storm which hit Shetland in 1993. This storm nearly broke the European record for low pressure with atmospheric conditions similar to a category 5 hurricane. If such a storm were to hit highly populated areas of the mainland, there would be widespread devastation and loss of life. Already, the number of winter storms crossing the UK mainland has doubled in the last 50 years.

Secondly, in a competitive world, market forces put a cap on how rapidly premiums can be increased without loss of market share. Even without climate change impacts, the rate of increases in losses is already beginning to be too rapid now for premium increases to keep pace, simply because people are wealthier, and more people are living in hazardous areas. Vulnerability is also increasing, as our society becomes more complex and inter-dependent.

There are implications not only for humans and their property, but also wildlife. The UK has 15,000 km of coastline with 106 internationally important sites for wintering waterfowl, 10 per cent of which have been identified as under threat from climate change, with a further 10 per cent vulnerable. English Nature estimate that at least 13,000 hectares of English shoreline, much of it vital wildlife habitat, will disappear in the next 20 years. Mudflats could decline by around 10,000 hectares; in the winter three million wading birds rely on the UK 's mudflats as breeding grounds. Saltmarshes will decline by 2,750 hectares by 2020, with two thirds of the loss in southeast England . Ten percent of saline lagoons are expected to disappear, along with many rare species.

Climate change has important implications for flood defences. By 2075, according to research for the government, climate change impacts could treble the frequency of the current "design" flood. A flood defence designed to a standard of service for the 100 year return period event will only provide protection ranging from the 50 year event in Anglian region to the 33 year event in the North East of England. The state of flood defences will therefore become increasingly important to insurers.

This does not fully take into account the effects of Antarctica , where temperatures are rising faster than the rest of the world. In Jan uary 2002, the "Larsen B" ice shelf broke away due to rising temperatures and this could speed up the movement and melting of land based glaciers in Antarctica and Greenland . (By coincidence, this happened while a film crew were shooting the opening sequence for the film "The Day after Tomorrow") There is a chance that this alone could raise sea levels by over a metre by the end of the century.

Figure 3: Sea level rise. (This assumes that Antarctica will have a temporary negative effect due to storage of increased snowfall.) Reproduced with the kind permission of the Hadley Centre at the Met Office

Figure 4: 50 year return period storm surge heights by 2080 under the A2 (medium high) emissions scenario. Shows the height in metres of the extreme sea level. Reproduced with the kind permission of the Hadley Centre at the Met Office

Figure 5: High water return periods at Immingham under the A2 emissions scenario. Levels which currently have a 100-year return period will have a 5.5 year return period by the 2080s.Reproduced with the kind permission of the Hadley Centre at the Met Office