1. Climate Change and Insurance:
The Tides Are Rising! (Or Are They?)
Please use this as the opening slide of your presentation.

2. Agenda Facts vs Myths NAIC requirements
Incorporation of Climate Change in:
Underwriting
Pricing
Risk Management
Impact of Climate change on Natural Catastrophe modeling
Please use these for slides that will use headers and/or sub headers.

3. Climate Change & Insurance
The Tides Are Rising! (Or Are They?)
Howard A. Kunst, MCAS MAAA CCRMP & Chief Actuary

4. Facts vs. Myths
What do we really know about climate change?

5. Global Temperatures
“It is certain that Global Mean Surface Temperature has increased since the late 19th century. Each of the past three decades has been successively warmer at the Earth’s surface than all the previous decades in the instrumental record, and the first decade of the 21st century has been the warmest.”
“The globally averaged combined land and ocean surface temperature data as calculated by a linear trend, show a warming of 0.85 [0.65 to 1.06] °C, over the period 1880–2012”
– Intergovernmental Panel on Climate Change (IPCC), September 2017
Other reports: accurate temperature measurements made from weather balloons and satellites since the late 1950s show no atmospheric warming since 1958 (James Cook University, December 2009)

6. Sea Level Rise/Ice Melting
Paleo sea level records from warm periods during the last 3 million years indicate that global mean sea level has exceeded 5 m above present (very high confidence) when global mean temperature was up to 2°C warmer than pre-industrial (medium confidence).
– IPCC, February 2018
Sea level rise is NOT uniform globally – regional variations do occur
Based on global mean surface temperatures continuing to rise,
Sea level rise estimate by 2100 range of 0.52 to 0.98 meters
Total melting of the Greenland sheet “over a millennium or more” could add an additional 7 meters

7. Hurricanes/Tropical Cyclones Conflicting Statements
“However, it is virtually certain that the frequency and intensity of the strongest tropical cyclones in the North Atlantic has increased since the 1970s.” “No robust trends in annual numbers of tropical storms, hurricanes and major hurricanes counts have been identified over the past 100 years in the North Atlantic basin.” “Based on process understanding and agreement in 21st century projections, it is likely that the global frequency of occurrence of tropical cyclones will either decrease or remain essentially unchanged, concurrent with a likely increase in both global mean tropical cyclone maximum wind speed and precipitation rates.” – IPCC, February 2018
Hurricane Harvey (2017)

8. Hurricanes/Tropical Cyclones

9. Severe Convective Storms (SCS)
Meteorology tells us that in a warmer climate, the upper bounds on potential thunder energy/intensity will increase, resulting in larger hail (amongst other factors)
Variability will increase, amplifying the magnitude on both the high and low end, but it’s expected that annual losses for hail will increase over the next 100 years.
Studies to date have not yet shown any correlation between climate change indicators and severe convective storms
No historical correlation, but expect it going forward?

10. NAIC Requirements
Climate Change Disclosures

11. What are insurers doing to assess and mitigate climate risks?
NAIC adoption of the Insurer Climate Risk Disclosure Survey in 2010
Designed to be an insurer reporting mechanism that would provide regulators with a window into how insurers' across all lines of insurance assess and manage risks related to climate change
Comprises a series of questions that assess insurer strategy and preparedness in the areas of investment, mitigation, financial solvency, and others
Provides information and best practices related to the insurers’ response to climate change
California (CDI) has been the main aggregator of this information

12. What are insurers doing to assess and mitigate climate risks?
Per NAIC, currently more than 1,000 companies are surveyed, comprising more than 70% of the entire U.S. insurance market
The SEC also has guidelines applicable to publicly traded companies

13. How Do Insurers Actually Use Climate Change Information?
Underwriting, Pricing and Risk Management

14. Underwriting Considerations
Potential changes in exposure at individual locations due to changes potentially related to climate change:
Sea level rise – has flood risk changed?; sea level rise not uniform
Drought – is there an increased risk for wildfire due to local drought?
Heat/drought/excess precipitation – flood, agriculture/crop insurance

15. Underwriting Considerations
Sea Level – storm surge flooding example
CoreLogic study from 2013 shows that 1 foot of sea level rise would have a significant increase to the number of homes, and RCV, affected by an event.
Countrywide, we estimate a 5-10% increase in the number and value of locations affected
In Miami, for example, the number of Single Family Residences at risk would more than double.

16. Underwriting Considerations
Large scale U/W guideline revisions; as hazard risk changes, guidelines may be revised
Sea level rise: minimum elevation rules updated
Drought: if not captured in wildfire model/scores, may need to update rules to adjust score ranges associated with specific underwriting actions
Heat/Drought/Excessive Precipitation: 100 year flood zones no longer as accurate, need to use a more granular scoring system beyond in/out

17. Pricing Considerations
Has the risk changed from when the base rates were set?
What does the risk look like over the entire term of the policy?

18. Risk Management Considerations
Has the exposure to risk had a material change on the potential impacts from large events?

19. Climate Change & Natural Catastrophe Models
Predicting Today vs. The Future

20. How Do the Models Actually Account For It?
Natural Catastrophe models estimate the risk of a specific event for the next year
For example, CoreLogic’s RQE® probabilistic model does 300,000 simulations of what can happen NEXT year, not 300,000 future years
However, the stochastic event sets include events for conditions that could mirror conditions in various climate scenario
Can segment out “warm water” scenarios

21. Wildfire
Many of the impacts from climate change (warming) have been attributed to the increase in wildfire activity
Excessive drought/excessive rainfall
Seasonal impacts already considered in models (event data set)
Potential for fuels to change
However requires a long term for species to change
Changing winds
Large loss events need winds to carry embers beyond the edge of vegetation
Higher winds can carry embers further
Environmental changes not necessarily associated with climate change
Bark beetle infestation (increasing numbers, killing trees)

22. Issues Around Sea Level Rise/Flood Modeling
Even a foot of sea level risk can have an impact on modeling coastal storm surge
Accentuates the need for more granular elevation data
10m grids  5m grids (1m along coastlines)
If precipitation changes, and river levels change – does FEMA have the ability to keep up with the re-mapping of flood zones?
100 year flood zone boundaries indicate where an event can happen with a 1% annual frequency; which again highlights the need for more granular elevation data

23. Severe Convective Storms & Tropical Storms
Main source of model inputs for SCS are the latest 30 years or more of historical storm data
Any change in current years would be blended with past
However, very low, if any signals in the data that would indicate a change (scientific analysis has not yet resulted in positive findings)
Tropical storm uses a longer historical period of observations
At least back to 1900, some models back to 1850
Simulated data set (100,000+) based on meteorology and how those storms form and move
Some events based on “warm water” periods so we can estimate what could happen

24. Questions?