Natural Perils - An Overview

David N. Bresch, PhD, Swiss Re

The Perils
The Assessment
Climate Change

Opera Seminar, London, 25 Sept 2001

Swiss Re

OPERA - Cat Perils

Swiss Res Cat Perils Group

~ 25 People

- Research and Development

Hazard Analyses / Hazard Maps
Vulnerability Analyses / Loss Statistics
Scenario and Loss Frequency Curves
Catastrophe Cover Concepts
- Advice, Support, Know-how-Transfer
Cat Perils Mapping Tools
Rating and Underwriting Tools
for SR Executives and Underwriters
for Clients, Institutions, Public
- Operative Tasks
SR Business and Capacity Policy for Cat Risks
Cat Market Research
- Contacts:Scientists, Consultants, Insurers, Brokers
- Publications on Cat-related Topics
Swiss Re

OPERA - Cat Perils

Loss Potential due to Natural Catastrophes (Cat perils)

Storms
Flood
Earthquake

5-20 billion US$

20-50 billion US$
50-100 billion US$

Swiss Re

OPERA - Cat Perils

Cat Perils information worldwide

www.elrix.com
Swiss Re

OPERA - Cat Perils

Insured Natural Catastrophe Losses 19702000

in USD billions, at 2000 prices. Source: Swiss Re sigma

30

Low loss burden 2000 random,

but upward trend expected to continue:

25

higher insurance penetration

growing values
value concentration in coastal areas
hazard cycles and trends, eg.
natural & man-made climate change

20
15

35

10
5
0
70

Swiss Re

73

76

79

82

85

88

91

94

97

OPERA - Cat Perils

2000

Loss history by hazard types

30

Natural Catastrophes
1986 - 1999

20

Flyod

Lothar Martin Bart

Northridge

Kobe

Georges

Storm

Fran

Earthquake

Opal

Hugo

Mireille

Vivian

10

Others
Floods

Andrew

15

Daria

Insured Losses
USD billion at 1998 prices

25

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Swiss Re

OPERA - Cat Perils

Windstorm: Extratropical vs Tropical Cyclone

Extratropical Cyclone
Winter Storm

Swiss Re

Tropical Cyclone
Hurricane/Typhon

Energy source North/South temperature contrast also over land

Occurrence
Mid-latitudes
Winter
Size
1000-2000 km

water condensation

Gust speeds
Losses

33-90 m/s
medium to total

20-50 m/s
lots of small to medium

over ocean only

Tropics
Summer
300-600 km

OPERA - Cat Perils

Largest storms since 1989

Death

12/9
9
09/99

Lothar, Europe

80

Bart, Japan

26

11/98 Mitch, Centr. Am.

9000

09/98 Georges, Carib./US

600

08/92

Andrew, Florida

15

10/91

Mireille, Japan

51

02/90

Vivian, Europe

64

01/90

Daria, Europe

95

09/89

Hugo, Carib./US

61

10

Insured loss
Swiss Re

15

20

Total loss

25

30

35

(billion USD)

OPERA - Cat Perils

Natural Perils - An Overview

David N. Bresch, PhD, Swiss Re

The Perils
The Assessment
Climate Change

Opera Seminar, London, 25 Sept 2001

Swiss Re

OPERA - Cat Perils

Swiss Res technical approach to catastrophe perils

1970

1980

1990

2000

no quantitative
methods

first attempts
for quantified
risk assessment

tools for
main areas
and perils

+ world-wide cat risk assessment

+ sophisticated software
+hazard/vulnerability databases

Swiss Re

OPERA - Cat Perils

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Concept of risk assessment - 4 box model

Quantify
Hazard

Vulnerability

Value
Distribution

Insurance
Conditions

Combine
Loss

xs Frequency
Swiss Re

OPERA - Cat Perils

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Hazard - European Winter Storm Template

Storm catalog based on 166 events
1947-1999

Lothar 26 Dec 1999

For every major storm since 1947

maps of the storms gust speed [m/s]
and duration [h] have been created
by the following procedure:
Surface pressure data (grid)
Surface fronts
Combined through physical model
gust speed [m/s]

Swiss Re

(Blended with measured in situ data)

OPERA - Cat Perils

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Hazard - Probabilistic Storm Set

166 detailed historical events 1947-1999
50 child storms for every single historical event (translation/intensification)
ensemble of 8300 storms, the probabilistic

set

representing ~2500 years

Anatol 3./4.12.1999

Swiss Re

Lothar 26.12.1999

Martin 27./28.12.1999

OPERA - Cat Perils

13

European Windstorm Risk Assessment: EuroWind

is a state-of-the-art probabilistic windstorm risk modeling tool to assess
winter storm losses in Europe, jointly developed by Swiss Re (model)
and EQECat (implementation, 2nd opinion)
covers Germany, UK, Ireland, France, Belgium, Netherlands,
Luxembourg, Denmark, Sweden and Norway - the areas most
prone to winter storms
allows the calculation of windstorm scenario losses: all major 166
historical events from 1947 - 1999 plus some few events since 1897
provides rating of proportional, non-proportional and stop loss treaties
based on the calculation of loss frequency curves:
probabilistic analysis with over 8000 historical and artificial events
explicitely models Europe-wide dependence (event-based approach)
Swiss Re

OPERA - Cat Perils

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Storm over Europe - an underestimated risk

www.swissre.com
Swiss Re

OPERA - Cat Perils

publications
15

Tropical Cyclone Risk Assessment - Fact sheet

Swiss Re Natural Perils Assessment Program for Tropical Cyclones (SNAP-TC)
SNAP-TC allows to assess tropical cyclone risk world wide and has been fully
developed in-house by Swiss Re
SNAP-TC operates as well for extended portfolios as for single risks
SNAP-TC basis its calculation upon a correlation matrix approach. Thus even
complex, locally irregular distributed exposure can be pooled under one treaty
and
can be calculated all at once.
SNAP-TC is highly flexible can be easily adopted by the user to individual needs,
such as risk classes, vulnerabilities e.g.
Swiss Re

OPERA - Cat Perils

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Natural Perils - An Overview

David N. Bresch, PhD, Swiss Re

The Perils
The Assessment
Climate Change
Basics
Impact Examples
Opera Seminar, London, 25 Sept 2001
Swiss Re

OPERA - Cat Perils

17

Climate Change - Greenhouse Effect

Swiss Re

OPERA - Cat Perils

18

Climate Change - Surface Temperature Trend

Swiss Re

OPERA - Cat Perils

19

Climate Change - Greenhouse Gases

Swiss Re

OPERA - Cat Perils

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Climate Change - Selected Consequences

Rising sea level

More intense hydrological cycle
(precipitation, hail,)
Increased climate variability
(eg. Interannual)
Changes in regional weather patterns, storm tracks
(either in frequency or in severity)
Swiss Re

OPERA - Cat Perils

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Climate Impact Examples

Excursion: Risk Mitigation

Global Climate Variability (1)

ENSO/El Nio - Tropical Cyclones (2)

North Atlantic Oscillation - North Atlantic Storm Track (3)

Swiss Re

OPERA - Cat Perils

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Excursion: Risk Mitigation - Current State

Probability that a risk

is hit by an event due
to a protection
measure failure

Swiss Re

Protection measures

Expected Mean

Event Distribution
eg. Intensity of Tropical Cyclones

OPERA - Cat Perils

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Excursion: Risk Mitigation - Possible Future

Swiss Re

Old Protection measures

Old Mean

Probability that a risk

is hit by an event due
to a protection
measure failure

New Mean

Shift of Regime

OPERA - Cat Perils

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Climate Impact Example 1: Global Climate Variability

Global Climate Simulation

(Calculated on Supercomputer, Grid approx 100 km x 100 km,
20 vertical levels, timestep 20 min.)
Shown: Temperature evolution over 60 years
Besides well-known long-term trend,
note the large year-to-year variability

Swiss Re

OPERA - Cat Perils

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Climate Impact Example 1: Global Climate Variability

Climate Variability - CO2 model prediction

change
> +3 C
< - 3 C
If the movie does not work: see movie4climate.mpg
Swiss Re

OPERA - Cat Perils

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Climate Impact Example 2: ENSO - Tropical Cyclones

Swiss Re

OPERA - Cat Perils

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Climate Impact Example 2: ENSO - Tropical Cyclones

North Atlantic (US) hurricane

activity below normal
during El Nio conditions
Swiss Re

OPERA - Cat Perils

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Climate Impact Example 2: ENSO - Tropical Cyclones

Effects of El Nio on local weather conditions

Torrential downpours: Pacific coast of Northern and Southern America
Extreme drought: On the Western rim of Pacific from Australia to Taiwan, in the
Indian subcontinent, in parts of Africa, in the northern part of South America
Tropical cyclones
Dramatic increase in number of Tropical cyclones in Central South Pacific
Decline of activity in Eastern part of Australia, the Northwest Pacific basin
and in the North Atlantic

Swiss Re

OPERA - Cat Perils

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Climate Impact Example 3: North Atlantic Storm Track

This
or that ?
Swiss Re

OPERA - Cat Perils

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Climate Impact Example 3: North Atlantic Storm Track

North Atlantic Oscillation (NAO)
Negative phase NAOPositive phase NAO+

Positive phase NAO+

more and stronger storms
crossing the North Atlantic
warm and wet winters in
Northern Europe
Swiss Re

OPERA - Cat Perils

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Climate Impact Example 3: North Atlantic Storm Track

NAO Index

Temperature trend

2
1.5
1
0.5

North Atlantic Oscillation

Index

0
-0.5
-1

Swiss Re

1995

1985

1975

1965

1955

1945

1935

1925

1915

1905

1895

1885

1875

1865

1855

1845

1835

1825

-1.5

data source: Hurrell, J.W., 1995

OPERA - Cat Perils

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Climate Impact Example 3: North Atlantic Storm Track

North Atlantic Oscillation - The Index (1970-1999)
2.5

2.13

2
1.5
1
0.5
0
-0.5
-1

Swiss Re

Dec 99

1995

1990

1985

1980

1975

1970

-1.5

data source: Hurrell, J.W., 1995

OPERA - Cat Perils

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Climate Impact Example 3: North Atlantic Storm Track

Atlantic Storm Track Activity (1860-2100)

Higher minimum temperatures

More intense mid-latitude storms

Observed (20th century)

Modeling (end 21st century)

Virtually certain >99%

Possible 33-66%

Very likely 90-99%

Possible 33-66%

Easterling et al., 2000, science

Collins, Journal of Climate
Swiss Re

OPERA - Cat Perils

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Climate Impact Example 3: North Atlantic Storm Track

North Atlantic Oscillation - European Winter Storms
NAO+

Results based on Swiss Res

storm catalog 1947-1999
which forms the basis for the
EuroWindTM hazard set.
EuroWindTM is the European
windstorm risk assessment
model jointly developed by
EQECat and Swiss Re.
Swiss Re

There is a strong relationship between the frequency of

winter storms and the North Atlantic Oscillation:
Three quarters of all storms bearing losses occurr
during months with positive NAO index (NAO+)
80% of the total loss 1947-99 occurred during NAO+
There is no such clear relation between the size of
losses and the NAO: larger losses tend to occurr during
the positive phase NAO+
Half (49%) of the winter months 1947-99 have been
NAO+ months
Unfortunately, there is no long-term prediction of the
NAO possible (yet)
OPERA - Cat Perils

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Climate Impact Examples

Risk Mitigation - climate related shift of distributions

Global Climate Variability - high variability

ENSO/El Nio - Tropical Cyclones activity cycle

NAO - Atlantic Storm Track changes: difficult trend detection

Swiss Re

OPERA - Cat Perils

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Climate Change - Swiss Res Commitment

Satisfy growing demand for cover

Support customers and the public in risk assessment and prevention
Participate in climate change research and inform the public
Seek climate dialogue with industry and government (UNEP initiative, IPCC)

Swiss Re

OPERA - Cat Perils

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