Climate change futures: health, ecological and economic dimensions

The number of consecutive days within offensive air masses is also very unusual for the analog summer. There are two
very long consecutive day strings of MT+ and DT air masses: from July 10 through July 22 and from August 2
through August 17. Using Washington, DC, as an example, in 1995, the hottest summer during the 59-year historic
period, there were 12 offensive air mass days between July 14 and August 4, but no more than 3 of these days
were consecutive. In Philadelphia, the 1995 heat wave was more severe than in Washington, DC, yet in terms of
consecutive days, it was still far less extreme than the analog summer. From July 13 to August 4, 1995, there were
20 offensive air mass days, but with several breaks when non-offensive air mass days lasted at least two days.
Maximum and minimum temperatures during the analog summer are far in excess of anything that has occurred in
recorded history. Using Philadelphia as an example again, 15 days recorded maximum temperatures that exceed
38 o C (100 o F) during the analog summer. On average, such an extreme event occurs less than once a year.
During the hottest-recorded summer over the past 59 years, 1995, this threshold was reached only once. Fifteen
days in the analog summer break maximum temperature records, and from August 4 to August13, nine of the ten
days break records. In addition, four days break the all-time maximum temperature record for Philadelphia, 41 o C
(106 o F), with three of these occurring during the 10-day span in August.
APPENDIX C. FINANCE: PROPERTY INSURANCE DYNAMICS
116 | APPENDICES
Overall costs from catastrophic weather-related events rose from an average of US $4 billion per year during the
1950s, to US $46 billion per year in the 1990s, and almost double that in 2004. In 2004, the combined
weather-related losses from catastrophic and small events were US $107 billion, setting a new record. (Total losses
in 2004, including non-weather-related losses, were US $123 billion; Swiss Re 2005a). With Hurricanes
Katrina and Rita, 2005 had, by September, broken all-time records yet again. Meanwhile, the insured percentage
of catastrophic losses nearly tripled from 11% in the 1960s to 26% in the 1990s and reached 42% (US
$44.6 billion) in 2004 (all values inflation-corrected to 2004 dollars, Munich Re NatCatSERVICE).
Damage to Physical Structures and Other Stationary Property: The current pattern of increasing property losses
due to catastrophic events — averaging approximately US $20 billion/year in the 1990s — continues to rise
steadily (Swiss Re 2005). Assuming that trends observed over the past 50 years continue, average annual insured
losses reach US $50 billion (in US $2004 dollars) by the year 2025. 2 Peak-year losses are significantly higher.
The industry largely expects this and does its best to maintain adequate reserves and loss-prevention programs.
The industry is caught unawares, however, by an equally large number of losses from relatively “small-scale” or
gradual events that are not captured by insurance monitoring systems such as Property Claims Services (which
only tabulates losses from events causing over US $25 million in insurance claims). Data on these relatively small
losses collected by Munich Re between 1985 and 1999 indicate that such losses are collectively equal in magnitude
to those from catastrophic events (Vellinga et al. 2001). 3 These include weather-related events such as lightning
strikes 4 (which cause fires as well as damages to electronic infrastructure), vehicle accidents from inclement
weather, soil subsidence that causes insured damages to structures, local wind and hailstorms, etc. Sea level rise,
changes in the patterns of infectious diseases, and the erosion of air and water quality are important classes of
gradual events and impacts, the consequences of which are also not captured by statistics on extreme events.
Losses from these small-scale events grow as rapidly as those for catastrophic events, with disproportionately more
impact on primary insurers than on reinsurers (who commonly offer only “excess” layers of coverage beyond a
contractually agreed trigger level).
1
Source: Munich Re NatCatService.
2
This is generally consistent with the global projection made by the UNEP-Finance Initiative and Innovest (2002), and by the Association of
British Insurers (2004) for the UK.
3
Even this estimate is conservative, as not all losses are captured by this more inclusive approach.
4
Lightning has been cited as responsible for insurance (presumably property) claims (Kithil 1995), but estimates vary widely. St. Paul Insurance
Co. reported paying an average 5% of US $332 million in lightning-related claims annually between 1992 and 1996 (Kithil 2000). The
portion of these costs that are related to electricity disturbances is not known. One report from the Department of Energy states that of the
lightning-related losses experienced at its own facilities, 80% were due to voltage surges (Kithil 2000). Hartford Steam Boiler Insurance &
Inspection Co. has observed that claims are far more common during warm periods. This is corroborated by Schultz (1999). In addition to
these losses, lightning strikes are responsible for 85% of the area burned by wildfires (Kovacs 2001).