As climate change unfolds, hurricanes give a high-profile glimpse into the potential effects of a warming world. Rising CO2 levels are boosting average air and ocean temperatures, providing more of the essential fuel for storms to develop and strengthen. Meanwhile, temperatures are climbing even faster at the poles than at the equator—which recent research is linking to changes in atmospheric steering currents and potential reductions in vertical wind shear, muting an inhibiting factor for hurricanes.
The effect of climate change on any one storm is less clear than the overall trend, but as Hurricane Ian hit first Florida and then South Carolina in 2022, it highlighted the importance of seeing the long-term picture.
Other factors may tend to dry and stabilize the atmosphere. Still, long-term studies generally point to more frequent severe storms over coming decades, reflecting more CO2 in the atmosphere. Given a sustainability scenario provided by the latest IPCC report also known as SSP 1-2.6 “taking the green road” if governments and societies manage to reduce CO2 emissions and limit the average global temperature rise by about 1.7ºC by 2050, still insurers’ average annual losses (AAL) are expected to increase by more than 20% compared to 2021 AALs, based on U.S. hurricane climate change projections.
A new white paper discusses this hurricane and flood risk in depth as part of a Verisk's natural hazard series, Ice, Fire, Wind, and Water.
Practical projections
Verisk’s industry-leading catastrophe models for U.S. hurricanes and Caribbean tropical cyclones, based on data from a wide range of climate research, are supporting the development of Climate Change Projections that give a probabilistic view of future risk. This includes potential change in average annual losses and other loss metrics. The resulting mapping files can help insurers and reinsurers to assess, mitigate, and adapt to rising exposure and changing regulations across business lines and portfolios—all informed by a deeper understanding of climate risk.
Learning from Hurricane Ian
The effect of climate change on any one storm is less clear than the overall trend, but as Hurricane Ian hit first Florida and then South Carolina in 2022, it highlighted the importance of seeing the long-term picture. Ian’s large size and its slow forward speed across above-normal sea surface temperatures were potential traits of hurricanes to come on a warming planet. One result was massive rainfall totals.
Claim costs exhibited significant effects from demand surge in areas affected by Ian. Verisk data shows that from September to October, Florida and South Carolina had the largest monthly change in residential and commercial reconstruction costs—respectively, 3.87% and 2.84% for residential, and 3.86% and 2.40% for commercial.
One early takeaway from Ian was the positive effect of strengthened building codes and enforcement, which reflects decades of effort. But other factors pose challenges to resiliency. Four of the counties that saw the greatest impact from Ian have grown 150% or more since 2004, including major development of farmland and coastal wetlands that formed a natural barrier between the Gulf of Mexico and urban areas during hurricanes.
Ian struck amid pre-existing turmoil in the Florida property market, where roof claims were driving an availability and affordability crisis for insurance buyers. Newly enacted 2022 Legislation was designed to address some of the issues. But the complexities surrounding such a market underscore the importance of insurers tapping into data-driven analytics to understand and manage portfolios and risk appetites. In Florida, key considerations may include the timeliness of data, multiple angles on roof risk, and the choice of a reliable data partner.
