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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 CentreHon 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
Georg
es (1
998)
Jean
ne (2
004)
Franc
es (2
004)
Hugo
(198
9)Iva
n (
2004
) Cha
rley
(200
4)W
ilma
(200
5)Rita
(200
5)And
rew (1
992)
Katrin
a (2
005)
*
$ 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.
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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)
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
The Risk Triangle
RISK
Hazar
d
Vulnerability
Exposure
A Framework for Adaptation?
Source: Crichton, 2001
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Exposure is growing…
• More people living near the coast or rivers
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Hazards are growing…
• Increase in severe rainfall events• Rising sea levels• Higher storm surges• More droughts and subsidence• Changing storm tracks
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
IPCC Third Assessment Report
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Source: Hadley Centre
Global mean surface temperature 1861- 2004
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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)
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
Table: Percentage of flood victims reporting health effects from floodingPhysical Effects Mental Effects
6No mental effects36No physical effects
9Suicidal thoughts14Sprains/ strains
18Nightmares14High blood pressure
24Anger attacks16Muscle cramps
27Panic attacks16Skin irritations
51Sleep problems20Weight loss
56Depression20Gastro-intestinal
67Stress21Respiratory illness
80Anxiety during rain23Stiffness in joints
Source: extracts from a table produced by Professor Dennis Parker, Middlesex Flood Hazard Research Centre
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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”
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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.
The information contained in this document is strictly proprietary and confidential ©Benfield Hazard Research Centre 2003
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