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Event-Based Risk Analysis and Global Warming

storm.jpgSwiss Re is the world's second largest insurance company, is known for taking the threat of global warming-induced climate change very seriously. One big problem with climate disruption is that it makes loss estimate projections based on historical trends unreliable. Environmental Finance reports (via WBCSD) that the insurance firm is now shifting to an approach they call "event-based risk analysis," which creates 500,000 simulated hurricane life cycles, modeling nearly every possible combination of storm intensity and path. This also allows them to model what happens when a storm hits an already-storm-damaged location.

Swiss Re has a short report (PDF) going into more detail about the results of the 2004 Hurricane season, and how event-based risk analysis is used. It makes for interesting reading, revealing how insurance analysts think about risk and natural disasters. While the authors are exceedingly careful to point out that climate change cannot be definitively fingered as the driver of the unusual (and occasionally unprecedented) weather seen this year, it's clear that Swiss Re is acting under the assumption that the 2004 storm season isn't an anomaly, but a harbinger.

Comments (2)

Adam Burke:

They don't pin this year's weather on climate change, but they do say:

"Today, global warming is a fact. The climate has changed: visibly, tangibly, measurably. ... Thus, the decisive issue again is not whether we have to adapt, but to what, when and how."

Not radical (do you want to buy insurance from a radical?) but much less institutional bet-hedging than usual.

I read The Carbon Wars by Jeremy Leggett. He was a professor at the London School of Mines (if my memory serves me well) and he touched a little bit on connection between the insurance industries and climate change.

Though the way he wrote, it is not meant to be a report or some sort, I thought it would be a good read if you haven't read about it. =)


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