Warming cost the U.S. an extra $24B — research

Source: By Daniel Cusick, E&E News reporter • Posted: Monday, January 13, 2020

Extreme weather associated with climate warming drove U.S. property losses $24 billion higher over the past 25 years than would have been expected under a more stable climate regime, according to new research from the American Academy of Actuaries.

That’s a “preliminary finding” of the newly released Actuaries Climate Risk Index (ACRI), which seeks to add quantitative muscle to what many insurance companies already believe: Climate change is a force multiplier to private property risk.

The index “breaks new ground by connecting the dots between property losses and changing patterns of extreme weather,” said Richard Gibson, a senior casualty fellow with the Washington-based group, which represents more than 19,000 professional actuaries.

To arrive at the figure, the group estimated property losses “from unusual levels of precipitation, temperature, and wind” between 1991 and 2016, compared with a reference period of 1961 to 1990.

The data was pulled from the Actuaries Climate Index — an ongoing collaboration between U.S. and Canadian actuaries — to provide “a new, more precise level of understanding of the effects of these changes to public policymakers, actuaries, insurers, disaster planners and others,” Gibson said.

The math wasn’t easy.

Beyond the likelihood of flood, fire or other extreme events, property risk is affected by housing markets, population shifts and changing development patterns. Zoning and building codes also can affect a property’s risk to extreme events, and dollar-assigned losses over long periods must be standardized for inflation and other factors.

The ACRI’s initial findings are based on an “exposure-adjusted loss” model that accounts for such variables. According to the index, nationwide property losses from extreme weather events between 1991 to 2016 equaled $24 billion, or 5% of $493 billion in total observed property losses over that period.

The southeast Atlantic region suffered by far the greatest, with extreme weather losses totaling $22 billion during the 25-year period, or 8% of all observed property losses in the region. This part of the country is most often hit by hurricanes.

Three other regions — the central east Atlantic, southern Plains and southwest Pacific — saw moderate losses. The Midwest, Alaska and the central west Pacific regions saw “no material impact from extreme weather,” according to the index.

A spokesman for the American Academy of Actuaries cautioned that the new index is not a static document. As weather and climate conditions change, the index will reflect those changes.

Officials also noted that the index does not reflect a political position.

“We fully understand and have heard from some who would prefer that actuaries make a political statement,” the group said in its report. “This is not the academy’s mission or undertaking.”