In a macroeconomic sense, few stand to bear the brunt of climate change more than property casualty insurers and reinsurers.

With this reality in mind, the Casualty Actuarial Society convened a panel in Hamilton, Bermuda to ponder the implications of a warming planet for the insurance industry

“There are important ways actuaries can contribute to the debate about climate change, from helping our employers and our industry understand the risks to quantifying the pricing and risk management implications,” Douglas Collins, consulting actuary for New York-based Towers Perrin, said, noting the implications for the industry are quite broad. “The first thing that comes to mind for our industry is property claims, particularly for wildfire, flood, and drought. These are likely to be increasing risks under a warming world. For the reinsurance community probably the biggest concern would be wind, especially hurricanes and tropical storms if climate change causes increased frequency and/or severity.”

In addition to actuaries, academics also weighed in.

Katharine Hayhoe, research associate professor in the Department of Geosciences at Texas Tech University, said it was important for insurers to consider how warming oceans will affect hurricanes. “If I look at all of the areas in which climate change may affect us and pick the top three most uncertain areas, hurricanes would be on that list,” she said. “There is no question that ocean surface temperatures have warmed. This is a concern because it means we are increasing the amount of energy available to tropical cyclones or hurricanes.”

However, Hayhoe cautioned there is a good deal of uncertainty remaining about how other factors such as El Niño events and vertical wind shear impact hurricanes.

Collins said it was this type of uncertainty that actuaries need to account for.

“What will challenge us as an industry are aspects of climate change that may not be considered by our models, particularly if we see more frequent severe property events or significant liability claims,” Collins said. “The bottom line is that the insurance and reinsurance community can handle worsening climate because by definition it is a long-term phenomenon.”

Hayhoe also struck an optimistic note.

“Some degree of future climate change is inevitable because of the heat-trapping gases we have already put into the atmosphere,” she said. “But by making smart choices that limit future production of heat-trapping gases, the most severe consequences of human-induced climate change can be averted.”

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