Windstorms and Insurance Windstorms and Insurance

RMetS Student Conference 21-23 August 2006

Richard Hewstonr.hewston@uea.ac.uk

University of East Angliahttp://www.uea.ac.uk/~e470848/

Supervisors: Dr Stephen Dorling Dr David Viner

Funding: Worshipful Company of Insurers

Worldwide Natural Worldwide Natural CatastrophesCatastrophes

Increasing economic and insured loss Since 1970, of the most expensive 40 insured losses, 33 were

weather related with 29 windstorm related. Successive record annual insured losses in 2004 and 2005Successive record annual insured losses in 2004 and 2005

Worldwide Natural Worldwide Natural CatastrophesCatastrophes

Increasing economic and insured loss Since 1970, of the most expensive 40 insured losses, 33 were

weather related with 29 windstorm related. Successive record annual insured losses in 2004 and 2005Successive record annual insured losses in 2004 and 2005

The trend exhibited is influenced by economic and demographic shifts and well as natural factors.

Weather Related Insured Loss Weather Related Insured Loss in the UKin the UK

~30% of loss from subsidence~30% of loss from subsidence ~70% associated with storms~70% associated with storms

Weather Related Insured Loss in the UK

0

500

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2500

1987

1988

1989

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1991

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1995

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1997

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1999

2000

2001

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2003

2004

2005

Year

£m

*Jan-June 2005 only

Weather Related Insured Loss Weather Related Insured Loss in the UKin the UK

~30% of loss from ~30% of loss from subsidencesubsidence

~70% associated with ~70% associated with stormsstorms

Weather Related Insured Loss in the UK

0

500

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2500

1987

1988

1989

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1991

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£m

*Jan-June 2005 only

Domestic claims make up 70-85% of total losses

Business Interruption accounts for ~12% of commercial claims (~3% of total weather related insured loss)

Weather Related Insured Loss Weather Related Insured Loss in the UKin the UK

Insured Loss in the UK

0

100

200

300

400

500

600

700

800

1991

Qtr

1

1991

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3

1992

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1

1992

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1993

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1

1993

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3

1994

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1

1994

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1995

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1995

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1996

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1996

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1997

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1

1997

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1998

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1

1998

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1999

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1

1999

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3

2000

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2000

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2001

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2001

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3

2002

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1

2002

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2003

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1

2003

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2004

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1

2004

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2005

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1

Date

Insu

red

Lo

ss (

£m)

4th quarter 2000 - Wettest Autumn for more than 200 years

Weather Related Insured Loss Weather Related Insured Loss in the UKin the UK

Insured Loss in the UK

0

100

200

300

400

500

600

700

800

1991

Qtr

1

1991

Qtr

3

1992

Qtr

1

1992

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3

1993

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1

1993

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3

1994

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1

1994

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3

1995

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1

1995

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3

1996

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1

1996

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3

1997

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1

1997

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1998

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1

1998

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1999

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1999

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2000

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2000

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2001

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2001

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2002

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2003

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2003

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2004

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2004

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£m)

4th quarter 2000 - Wettest Autumn for more than 200 years 1st quarter 2005 due largely to windstorm Erwin

Windstorm ErwinWindstorm Erwin

Wind at altitude of 9km for 1800GMT on 7th January, 2005

Source: Danish Met Institute

Windstorm ErwinWindstorm Erwin

Insured lossesInsured losses UK ~£250mUK ~£250m Denmark ~£400mDenmark ~£400m Sweden ~£230mSweden ~£230m

Sweden recorded windspeeds of Sweden recorded windspeeds of 33m/s inland, resulting in 33m/s inland, resulting in unprecedented damage to the unprecedented damage to the forest industry (£1.6-2.3bn)forest industry (£1.6-2.3bn)

Industry wide, the figure for total Industry wide, the figure for total insured losses relating to insured losses relating to Windstorm Erwin stands at Windstorm Erwin stands at £1.1bn£1.1bn

Wind at altitude of 9km for 1800GMT on 7th January, 2005

Source: Danish Met Institute

Modelling Windstorm LossModelling Windstorm Loss

Crichton, D. (1999). The Risk Triangle, Natural Disaster Management. Journal, Ingleton. London, Tudor Rose: 102-103.

Risk Risk TriangleTriangle

Source: Crichton (1999)

Exposure – position, orientation, regional terrain, topography

Vulnerability - shape, constructional details and state of maintenance (preparedness)

Hazard – windstorm characteristics

Modelling Windstorm LossModelling Windstorm Loss

Crichton, D. (1999). The Risk Triangle, Natural Disaster Management. Journal, Ingleton. London, Tudor Rose: 102-103.

Windstorm damage is the result of wind loads exceeding the resistance of the structure, affecting parts of the building such as roofs, envelopes and

openings. 79% of all damage since 1970

is related to roofs

Important factor is Vulnerability

Different regions have different building standards

Risk Risk TriangleTriangle

Source: Crichton (1999)

Exposure – position, orientation, regional terrain, topography

Vulnerability - shape, constructional details and state of maintenance (preparedness)

Hazard – windstorm characteristics

Modelling Windstorm LossModelling Windstorm Loss

Following Klawa and Ulrbich Following Klawa and Ulrbich (2003)(2003)

Windstorm loss modelling Windstorm loss modelling using using wind gust speeds from a wind gust speeds from a

network of UK Met Office network of UK Met Office observing stations observing stations

various socioeconomic various socioeconomic data sets which help to data sets which help to quantify vulnerabilityquantify vulnerability

Claims data from insurers Claims data from insurers for verificationfor verification

Klawa, M and U. Ulbirch (2003), Klawa, M and U. Ulbirch (2003), A Model for the Estimation of Storm Losses and the Identification of A Model for the Estimation of Storm Losses and the Identification of Severe Winter Storms in GermanySevere Winter Storms in Germany, Natural Hazards and Earth Systems Sciences, Vol. 3, pp725-732 , Natural Hazards and Earth Systems Sciences, Vol. 3, pp725-732

Modelling Windstorm LossModelling Windstorm Loss

10°0'0"W12°0'0"W

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56°0'0"N56°0'0"N

58°0'0"N58°0'0"N

60°0'0"N

60°0'0"N

Maximum windspeeds, not Maximum windspeeds, not mean windspeeds, closely mean windspeeds, closely related to damage related to damage (eg.Dorland et al (2000), (eg.Dorland et al (2000), Hanson et al (2004)).Hanson et al (2004)).

Daily maximum gust speed Daily maximum gust speed and direction are available and direction are available from the British Atmospheric from the British Atmospheric Data Centre Data Centre

The 98th percentile value of The 98th percentile value of the daily maximum gust the daily maximum gust speeds used, incorporating speeds used, incorporating “wind climate”“wind climate”

98th percentile Maximum Gust Speeds

Dorland, K., J. Palutikof and R. Tol (2000). Modelling Storm Damage in the Netherlands and the UK., in Weather Impacts on Natural, Social and Economic Systems in the Netherlands. Institute for Environmental Studies, Vrije Universiteit, Amsterdam: 57-81.Hanson, C., T. Holt and J. Palutikof (2004). An Integrated Assessment of the potential for Change in Storm Activity over Europe: Implications for Insurance and Forestry in the UK. Norwich, Tyndall Centre: 98.

Wind Data

Modelling Windstorm LossModelling Windstorm LossSocio-economic Socio-economic DataData

Census data from Census data from 1981,1991 and 20011981,1991 and 2001

Experian data Experian data “Wealth “Wealth indicators”indicators”

10°0'0"W

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50°0'0"N 50°0'0"N

52°0'0"N 52°0'0"N

54°0'0"N 54°0'0"N

56°0'0"N 56°0'0"N

58°0'0"N 58°0'0"N

60°0'0"N 60°0'0"N

Household Density (2000)

Modelling Windstorm LossModelling Windstorm LossClaims Claims DataData

Ecclesiastical Insurance Ecclesiastical Insurance GroupGroup

Norwich Union (via loss Norwich Union (via loss adjustors Cunningham adjustors Cunningham Lindsey)Lindsey)

Claims data for domestic Claims data for domestic properties suffering losses properties suffering losses associated from windstormassociated from windstorm

Modelling Windstorm LossModelling Windstorm LossClaims Claims DataData

Ecclesiastical Insurance Ecclesiastical Insurance GroupGroup

Norwich Union (via loss Norwich Union (via loss adjustors Cunningham adjustors Cunningham Lindsey)Lindsey)

Claims data for domestic Claims data for domestic properties suffering losses properties suffering losses associated from windstormassociated from windstorm

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50°0'0"N 50°0'0"N

52°0'0"N 52°0'0"N

54°0'0"N 54°0'0"N

56°0'0"N 56°0'0"N

58°0'0"N 58°0'0"N

60°0'0"N 60°0'0"N

Claims Associated with Windstorm Erwin (Jan

2005)

Modelling Windstorm LossModelling Windstorm Loss

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Windstorm ErwinMax Gust Speeds (normalised to 98th

percentile value)10°0'0"W

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50°0'0"N 50°0'0"N

52°0'0"N 52°0'0"N

54°0'0"N 54°0'0"N

56°0'0"N 56°0'0"N

58°0'0"N 58°0'0"N

60°0'0"N 60°0'0"N

Modelling Windstorm LossModelling Windstorm LossWindstorm Erwin

Predicted insured loss10°0'0"W

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Modelling Windstorm LossModelling Windstorm LossWindstorm Erwin

Predicted insured loss10°0'0"W

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50°0'0"N 50°0'0"N

52°0'0"N 52°0'0"N

54°0'0"N 54°0'0"N

56°0'0"N 56°0'0"N

58°0'0"N 58°0'0"N

60°0'0"N 60°0'0"N

Actual insured loss

Climate Change and Future Climate Change and Future LossesLosses

Crichton, D. (1999). The Risk Triangle, Natural Disaster Management. Journal, Ingleton. London, Tudor Rose: 102-103.Dlugolecki, A. (2004). A Changing Climate for Insurance - A summary report for Chief Executives and Policymakers, Association of British Insurers.

Risk Risk TriangleTriangle

Source: Crichton (1999)

Climate change Climate change

Change in Change in HazardHazard

ABI believe we are currently seeing an annual increase in losses of 2-4% due to climate change (Dlugolecki 2004)

Damage functions NOT a linear relationship to weather hazard

(eg. Wind Damage is related to cube of wind speed)

Climate Change and Future Climate Change and Future LossesLosses

Using RCM output in the loss model to simulate future losses

Climate Change and Future Climate Change and Future LossesLosses

Using RCM output in the loss model to simulate future losses

Providing REgional Climates for Impacts Studies (PRECIS) driven by ECMWF 40 Year Re-analysis (ERA-40) data hourly data for 25km grid for 25km grid

Climate Change and Future Climate Change and Future LossesLosses

Using RCM output in the loss model to simulate future losses

Providing REgional Climates for Impacts Studies (PRECIS) driven by ECMWF 40 Year Re-analysis (ERA-40) data hourly data at 25km at 25km22

Run PRECIS with boundary conditions from HadAM3P (2070-2100) Max Planck Institute ECHAM4 global climate model

Run PRECIS under different IPCC Special Report on Emissions Scenarios (SRES)

Thank YouThank You