Global changes and catastrophic loss. Glenn McGillivray Managing Director Institute for Catastrophic Loss Reduction October 8, 2014

Transcription

1 Global changes and catastrophic loss Glenn McGillivray Managing Director Institute for Catastrophic Loss Reduction October 8, 2014

2 ICLR Mission - reduce loss of life and property caused by severe weather and earthquakes Created in 1997 by the insurance community to confront rising disaster losses Multi-disciplinary research and education provides an essential foundation for science to action 30 scientists / 100+ students / 12+ universities / 350+ research papers / $50+ million in research University of Western Ontario affiliated

3 In the media

4 Kathy Bardswick (Chair) ICLR board President & Chief Executive Officer, The Co-operators Group Barbara Bellissimo Chief Agent & Senior Vice President, State Farm Canada Charmaine Dean Dean of Science, Western University Louis Gagnon President, Service & Distribution, Intact Insurance Andrew N. Hrymak Dean, Professor, Chemical and Biochemical Engineering, Western University Paul Kovacs Executive Director, Institute for Catastrophic Loss Reduction Sharon Ludlow President, Aviva Insurance Company of Canada Brian Timney Dean of Social Science, Western University

5 Considerations Disasters are a serious threat Losses are rising. Why? What can be done about it?

6 Number of cat. events Source: Swiss Re, sigma

7 Insured losses (1H) USD billion at 2005 prices Minimum selection criteria: 120 Total losses USD 89.2 m 110 Or: 100 Insured property claims 90 Shipping: USD 19.3 m 80 Aviation: USD 38.6 m 70 Other: USD 48.0 m 60 Or: 50 Casualties 40 Dead or missing: Injured: Homeless: $19 billion Source: Swiss Re, sigma

8 Insured losses by peril CLIMATE RELATED EARTHQUAKES VOLCANOES GEOPHYSICAL Earthquake, volcanic eruption METEOROLOGICAL Severe weather, winter & tropical storms, hail, tornado HYDROLOGICAL River & flash flood, storm surge, landslide CLIMATOLOGICAL Heatwave, freeze, wildland fire, drought TREND

9 Number of victims ,000, ,000 Storm in Bangladesh Earthquake in Peru Earthquake Tangshan, China Cyclone Gorki, Bangladesh EQ, tsunami Indian Ocean 10,000 1, Natural catastrophes Man-made disasters Left hand scale: logarithmic. Source: Swiss Re, sigma No 2/2006

10 Global disaster damage Annual insurance disaster claims, billions, adjusted for inflation 20 fold increase since 1970s!

11 Canadian catastrophes

12 Canadian catastrophes

13 World risk index

14 Canadian disaster damage Number of events s 1970s 1980s 1990s 2000s Meteorological - Hydrological Geological

15 Canadian catastrophes 10 killed/100 evacuated/community assistance required/historically significant/community unable to recover on its own Based on data from the Canadian Disaster Database, Public Safety Canada

16 Canadian catastrophes Primary concern rests with flood and earthquake (the latter on the west coast and the Ottawa/Montreal corridor) Many instances of flood, few of EQ Though when (not if) a major earthquake strikes the west coast, damage will likely be severe 13 great earthquakes along this fault in the last 6,000 years Six richter 7+ events in the last 130 years in southwest B.C. and northern Washington state Will happen again, just a matter of when Are we ready?

17 EQ scenarios

18 Canadian catastrophes Hurricanes seldom impact Canada Usually just remnants when they do hit Biggest concern is on the east coast Forest fire becoming a concern as developments grow and interface with wildlands Tornado risk also increasing due to growing development Misc. risks such as ice storm, blizzard, hail etc.

19 Canadian cats 2009 Winter storms in eastern Canada (Feb. 2) $25 million Hamilton rain (July 26) $100- to $150 million Alberta wind etc. (August 2-3) $500 million Mont Laurier tornado (August 4) $6 million Manitoba hail etc. (August 13-15) $50- to $75 million Ontario tornadoes (August 20) $50- to $100 million Tropical storms Bill & Danny (August 23 & 29) $10 & 25 million Source: Aon Benfield (Canada)

20 Canadian cats 2010 Saskatchewan storms (Spring) Leamington & Harrow tornadoes (June 6) Midland tornado (June 23) Calgary hailstorm (July 12) >$400 million Hurricane Igor (September 21)

21 Canadian cats 2011 Storms in Ontario & Quebec (March) Storms in Ontario & Quebec (April) Wildfire in Slave Lake, Alberta (May 15) $700 million Flooding in Saskatchewan, Manitoba, Quebec (Spring) Hail, tornadoes and wind in Alberta, Man. & Sask. (July 18/19) Tornado in Goderich (August 21) Hurricane Irene (August 28 to 30) Alberta windstorm (November 27)

22 Canadian cats 2012 Flooding and wind in Ontario and Quebec (May 26 to 29) Flooding, wind and hail in Alberta (July 12) Flooding, wind and hail in Ontario (July 23) Hail and wind in Alberta (July 26) Flooding, wind and hail in Alberta (August 12)

23 Canadian cats 2013 Two small events early in the year Southern Alberta flood (June 19-21) $1.7 billion GTA flood (July 8-9) $940 million Ontario/Quebec storm (July 19) Ontario/Quebec/Atlantic ice storm (December 22-26) $200+ million

24 2013 Reuters High River, Alberta, Canada

25 June 23, Reuters/Andy Clark

26 Trans-Canada Highway, Alberta 2013 AP Photo/The Canadian Press, Jonathan Hayward

27 Calgary, Alberta, Canada >$1.7 billion insured damage 2013 AP Photo/The Canadian Press, Jonathan Hayward

28 Courtesy of Kim Sturgess, WaterSMART AB, 2014 June, 1929

29 2013 AP Photo/The Canadian Press, Winston Neutel Toronto, Canada

30 2013 AP Photo/The Canadian Press, Frank Gunn

31 2013 Reuters/Mark Blinch

32 2013 Reuters/Mark Blinch >$850 million insured damage

33 Toronto, Ontario $225 million insured damage

34 2013 high water marks Canada s costliest and third costliest insured loss events within two weeks of each other Ice storm now the second costliest took 15 years! Two billion dollar natural catastrophes in one year a first! Second place event (Slave Lake) fell not one, but two notches to fourth place 5 th consecutive year of billion-dollar events

35 Canadian cats 2014 Angus tornado (June 17) >$30 million Saskatchewan & Manitoba storms (June 28) Ontario storms/burlington flood (August 4) $90 million Alberta wind & thunderstorms (August 7 & 8) $450 million $652 million (first eight months)

36 Burlington, Ontario August 4, 2014 $90 million insured damage 2013 Reuters/Mark Blinch

37 Billion-dollar years 1998 due solely to the ice storm 2005 due greatly to the August 19 GTA rainstorm 2009 due greatly to back-to-back windstorms in Alberta 2010 due greatly to large hailstorm in Alberta 2011 due greatly to Slave Lake wildfire 2012 due greatly to one large and two smaller hailstorms in Alberta 2013 due to the Southern Alberta flood and GTA flood

38 Avg. difference between loss ratios (Auto vs. personal property) 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%

39 New normal The Institute for Catastrophic Loss Reduction (ICLR) reports that large insured losses from extreme weather appear to be the new normal for the Canadian insurance industry, expecting that large-loss years will no longer be rarities. Canadian Underwriter (November 6, 2012)

40 When the feds say we have a problem The rising cost of natural disasters and the financial burden on Ottawa is the country s biggest public safety risk Public Safety Canada, 2013/14, Report on Plans and Priorities

41 Why are losses rising? More people and property at risk Aging infrastructure The climate is changing

42 Why are losses rising? More people and property at risk Aging infrastructure The climate is changing

43 Global population

44 Canadian urban population

45 Residential structures Source: ICLR, based on data from Statistics Canada

46 Motor vehicle registration

47 Increasing values in exposed areas Ocean Drive, FL, Ocean Drive, FL, 2000.

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53 Why are losses rising? More people and property at risk Aging infrastructure The climate is changing

54 Infrastructure spending Source: ICLR, based on data from Statistics Canada

55 Source: Federation of Canadian Municipalities Aging infrastructure

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57 Why are losses rising? More people and property at risk Aging infrastructure The climate is changing

58 Global Warming, Source: NASA Goddard Space Flight Center Scientific Visualization Studio Difference from Average - 2 C C

59 Temperature Variation ( C) Global Temp HOW BIG A CHANGE IS 3-5 C OVER 100 YEARS? WARM PERIODS + 1 STUDYING THE HISTORY TELLS US: Warming since last Ice Age was about 5-7 o C over 10,000 years; Projected global warming over the next 100 years is 2-4 o C; The rate of warming will be about 50 times faster. ICE AGES 0 -(5-7 ) 400, K YEARS AGO 300, ,000 Years Before Present 100,000 0 NOW TELLING THE WEATHER STORY 59

60 2013 was the 37th consecutive year with a global temperature above the 20th century average

61 August 2014 was the 354th consecutive month with a global temperature above the 20th century average

62 CO2 (ppmv) , , , , , , , ,000 0 Age (years BP) Source: National Climatic Data Center, NOAA

63 CO2 (ppmv) , , , , , , , ,000 0 Age (years BP) Source: National Climatic Data Center, NOAA

64 CO2 (ppmv) CO2 Concentration: , , , , , , , ,000 0 Age (years BP) Source: National Climatic Data Center, NOAA

65 CO2 (ppmv) CO2 Concentration: 400 After 40 more years at the current rate of increase , , , , , , , ,000 0 Age (years BP) Source: National Climatic Data Center, NOAA

66 Causing Bigger, Harder Downpours, and Simultaneously Causing Longer and Deeper DROUGHTS 1 Evaporation from the ocean into the atmosphere increases even MORE 4 Snowpacks melt earlier in the year, leading to more spring flooding, but less water in the heat of summer 2 As the air gets even warmer, it can hold even MORE water vapor 5 There are longer intervals in drought-stricken areas between downpours, making droughts EVEN WORSE 3 Heavy downpours get even heavier, causing worse flooding 6 More water also evaporates MORE QUICKLY from the soil, making DROUGHTS deeper and longer still istockphoto/terry Morris

67 Anomaly Relative to Mean ( C) Change in annual global temperature ( ) Source: National Climatic Data Center, NOAA

68 Increase in heavy precipitation days 2 Worldwide Source: Alexander, L. V., et al., Global observed changes in daily climate extremes of temperature and precipitation, J. Geophys. Res., 111, D05109, doi: /2005jd006290, American Geophysical Union. Reproduced by permission of American Geophysical Union.

69 Average Spring - Summer Temperature ( F) Hotter Years Typically Have More Fires 40 Years of Western U.S. Fire and Temperatures Average Temperature Number of Fires Fires on U.S. Forest Service Land Data: Climate Central, The Age of Western Wildfires, September, 2012

70 Colorado Springs, Colorado June 26, AP Photo/Helen H. Richardson, The Denver Post

71 2012 Reuters/Rick Wilking

72 2012 NBC Universal Archives Waldo Canyon Fire, Colorado June 27, 2012

73 Black Forest, Colorado June 12, Reuters/Rick Wilking

74 Black Forest Fire, Colorado June 11, ABC News via AP

75 West Fork Complex Fire, Colorado June 20, Reuters/The Pike Hotshots/U.S. Forest Service

76 Yarnell Hill Fire, Arizona June 30, firefighters were killed fighting the Yarnell Hill fire 2013 AP Photo/The Arizona Republic, Tom Story

77 Kelowna, B.C. September 2003

78 Projected winter temperature change Between and , Canadian climate change model Source: Meteorological Service of Canada, Environment Canada.

79 The only plausible explanation for the rise in weather-related catastrophes is climate change. Munich Re One of the two largest reinsurance companies in the world September 27, 2010

80 What can be done? Loss prevention Risk transfer

81 Loss prevention Structural measures Non-structural measures Public awareness

82 Structural measures Dams, levees, seawalls and other engineered structures can be effective mechanisms for protecting communities Building codes should reflect climate knowledge Warning systems reduce injuries and fatalities

83 Structural measures - hard

84 Structural measures - hard

85 Structural measures - hard

86 Structural measures - hard

87 Structural measures - hard

88 Structural measures - hard

89 Structural measures - hard

90 Structural measures - soft

91 Structural measures - soft

92 Non-structural measures Non-structural measures are effective means to improve the safety of how we live, study and work Land use planning has been proven to be a powerful tool to reduce damage and injuries

93 Public awareness Community actions are the most important and effective in promoting disaster safety -- think locally and act locally Informed families and businesses are best able to manage nature s hazards Don t be taken by surprise Don t wait for it, plan for it Canadians must establish a culture of preparedness

94 Public awareness

95 Role of insurance Pay disaster losses Support research in climate extremes Lobby for better disaster management Promote better building practices Provide incentives and disincentives Through pricing Through policy wordings/exclusions Through refusal to bind coverage But insurance is NOT mitigation, it is simply passing on the bill to someone else

96 ICLR efforts Three main areas of concentration Housing Fieldwork Labwork Municipal governments and cities Small business

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108 Hurricane Gustav We found one house in Houma, LA with a roof failure (city of 100,000 people). The cause of the damage was missing toenails. The roof flew off the left house and landed on the roof of the right house, penetrating the sheathing.

109 Building codes protect homes severe wind damage, Florida, dollars per square foot,

110 Boundary Layer Wind Tunnel Insurance Research Lab for Better Homes WindEEE Research Institute ICLR efforts Testing set-up

111 Three Little Pigs project at UWO Now known as the The Insurance Research Lab for Better Homes

112 Test models in wind tunnel Institute for Catastrophic Loss Reduction

113 The concept

114 November 14, 2005

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116 Current Design Should work well for structural tests

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119 WindEEE Dome

120 Designed for safer living Better than building code First home launched at West Point, P.E.I. in November 2006 Impact-resistant windows rated for high wind pressures; 1 thick steel rods that anchor the floors together, including between the first floor to the foundation; Steel braces securing the trusses to the framing, and braced gable ends to withstand high winds; Special shingles designed to meet 200 km/h standards, installed using additional nails and cement; Heavy roof sheathing designed to stay dry, fastened with ring-shank nails in a tight nailing pattern; Water-resistant sealing around windows and doors; Adhesive weather-resistant strips installed over every joint in the roof sheathing to protect against water intrusion; and Special wind-resistant siding, fascia and soffits.

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124 Designed for safer living Second home launched in Sudbury, Ont. Feb. 19., 2007

125 Designed for safer living Third home currently under construction in Fort Erie

126 Showcase Homes Retrofit an existing home to make it more resilient to natural hazards which exist in a given area May 2008, retrofitted a home in Montreal to make it more resilient to earthquake and winter storm: Installed a diesel generator as an alternative power source Put in surge protection on bigger-ticket electronic items Fit the meter with a natural gas seismic shut off valve Anchored cabinets, office equipment, and bedroom furniture to walls Outfitted the washing machine with armoured water supply hoses Anchored the hot water heater to the floor Secured pictures and mirrors to the walls Applied 3M Scotchshield safety UV film to windows Installed carbon monoxide and smoke detectors and providing a fire extinguisher Installed snow melt cables on roof edges and gutters to prevent the formation of ice dams Provided a disaster preparedness kit.

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136 Window well & lot grading

137 Showcase Homes London - tornado (2003) Halifax - hurricane (2004) Vancouver - earthquake (2005) Ottawa - winter storm (2006) Edmonton - tornado (2007) Montreal - ice storm (2008) Toronto - winter storm/blackout (2009) North York - basement flooding (Aug. 19, 2009) Jasper - wildfire (2010) Hamilton - basement flooding (2011) Moncton basement flooding (2012) Quebec earthquake and winter storm (2013) Burlington basement flooding (2014)

138 Building code work

139 ICLR/UWO NBC/NPC submissions 2012 NBC/NPC submissions Clarify sewer backflow protection requirement Align wall and roof sheathing fastening requirements Bracing to resist lateral wind loads Clarify connection of foundation drainage to sanitary/storm Clarification of requirements for anchoring columns and posts

140 Drowning in claims Over past ten years, water damage has become one of the greatest sources of homeowner insurance payouts Water claims surpassed fire claims in 2005

141 Water is the new fire

142 Recent large loss events Mississauga, Brampton, Toronto, 2013: >$943 million Thunder Bay, Montréal, Ottawa, Hamilton, Toronto, Steinbach, 2012: >$350 million Hamilton, 2009: $ million Southern Ontario, 2005: >$500 million Peterborough, 2004: $87 million Edmonton, 2004: $166 million MANY OTHERS! IBC, 2012: $1.7 billion average insured water damages per year in Canada

143 Water damage claims 2003 average: $8, average: $20,537 Source: Aviva Canada, 2014:

144 Why are losses rising? Aging infrastructure The climate is changing More people and property at risk However Aging infrastructure The climate is changing Changing lifestyles

145 Just add water

146 Encouraging homeowner action

147 Encouraging good decision-making

148 Encouraging homeowner action

149 ICLR resources

150 Scope for growth Natural and man-made catastrophe losses , in USD billion (2012 prices) Insured losses Uninsured losses

151 DFAA growth 14 Frequency of DFAA Payout Requests ( )

152 Making flood insurable for Canadian homeowners

153 Making flood insurable for Canadian homeowners Many countries around the world offer flood coverage for homeowners In Canada, flood not covered in homeowners policies Only G8 without such coverage Flood insurance available for (low-risk) commercial customers Flood-related auto losses are covered under comprehensive coverage Sewer backup is covered (with proper endorsement) Other flooding and water damage is covered (i.e., water escape) Burst pipes, sump pump failures, water heater failures Burst municipal watermains In some cases: snow melt, downspout drainage, possibly infiltration flooding

154 Making flood insurable for Canadian homeowners Probably bundled coverage, risk based rates, defined roles of different players Insurance should not replace flood management measures currently in place should support them To combat adverse selection, economic viability issues Extend bundled coverage to all types of flooding Incorporate into standard home policies Real problem associated with consistency/reliability of flood maps

155 Thank you!