How will global warming impact insurance claims?

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In Science magazine, one of the leading US research journals, there is a comprehensive overview of the evolving impact of climate change on the insurance industry by Evan Mills[17], a senior scientist at LBNL (Lawrence Berkeley National Laboratory).  Mills is a respected chronicler of the insurance industry’s action on climate change.  One graph stands out.  It shows data obtained by a long-established US insurance firm, the Hartford Steam Boiler Inspection and Insurance Co.  Along the y-axis was temperature (°F) and on the x-axis were the number of claims filed in several north eastern US states for lightning strikes.  Several years’ data from the mid 1990’s lay on the general trend, a logarithmic curve (inset).  Here, below, the data has been transposed and temperatures converted to °C.  The log-linear plot shows there is an exponential relationship with temperature.  It can be used to make an estimation of the relative number of claims there will be as the temperature anomaly increases.

PALca and Lightning claims recorded by Hartford Boiler Insurance

Plot of lightning claims recorded by Hartford Boiler Insurance Co. (inset = original)

This is how the PALca[16] algorithm works.  Suppose the global, pre-industrial temperature, T, was 16 °C – actually, the precise value does not matter.  According to the algorithm, there would have been 23.5 hypothetical claims.  If the world is now 0.8 °C warmer i.e. the globally averaged Tanomaly = 0.8 °C, there would be 27.1 claims.

Of course, for a simpler correlation a linear equation would suffice; but it might under-predict the effect on claims of an increasing temperature anomaly.

The 2013 IPCC climate change science report[18] defines Tanomaly and the data from the US National Ocean and Atmospheric Administration (NOAA) provides us with an excellent and coherent source of yearly, monthly and daily (imagery) data[19].  NOAA’s ‘land and sea’ temperature has been found to be the most suitable.

In Chapter 3 the benefits and drawbacks of using temperature anomaly as a proxy for the effects of climate change were discussed.  Whatever the concerns, Tanomaly is recognised worldwide and the ‘2° C target’ is one of the IPCC’s clear goals[20].

As explained in Chapter 7, we define the extent to which climate change damage can be attributed to man-made (anthropogenic) CO2 emissions using x, a term that can now be defined as follows:

x = PALca{ Tnow } / PALca{ Tpre-industrial } – 1


Tnow = Tanomaly (now) + Tpre-industrial and

Tpre-industrial = T before global warming began.

This is the average fraction of losses that is attributable to man-made (anthropogenic) warming (assuming that natural variations in temperature have been fully taken into account).  In the case of 0.8 °C of warming x = 27.1/23.5 – 1 = 0.15.  By extension, 15 per cent of today’s weather related losses need to be attributed to the cause: the producers of CO2 – all of them, from Newcomen[21] in 1712 right through to the Big Energy, Big Cement, Big Land and Big Everything companies of today.  Pragmatically, though, the 1960’s make a good baseline.  But more of that later!

Returning briefly to the question of lightning, in 2014 there was a major study published in Science magazine by David M. Romps[22] et al.  Their algorithm for lightning strike prediction, links several mechanisms that are likely to be significantly affected by increasing Tanomaly.  Using a number of leading climate prediction models, which are well suited to work with their methods, Romps et al. determined that the number of lightning strikes (in the continental US) will increase by 12 ± 5 per cent per °C.  The PALca prediction lies within those bounds.  Romps et al.’s results are illustrated below.

Mean of CAPE, precipitation, CAPE times precipitation, lightning flashes.

Romps et al.[23] ‘Projected increase in lightning strikes in the United States due to global warming’ (Science, November 2014) predicted flashes bottom left, actual flashes bottom right.

The above article is taken from Predicting the Price of Carbon – How to Crack the Climate Change Code for Good.

Richard Clarke

Author: Richard Clarke

Richard Clarke is Director (Research) and co-founder of PAL. He has authored many academic articles and made keynote presentations at conferences on heat exchangers, helium resources and supply. He has recently published his second book, on climate change and the insurance industry, Predicting The Price of Carbon. Richard developed the science behind PAL Carbon.

How will global warming impact insurance claims? was last modified: May 12th, 2017 by Richard Clarke

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