December 2014. Feel free to direct questions or comments to Bill Stewart.
One of the principal challenges facing Property and Casualty Insurers today is effectively evaluating the risk of climate change. Insurers that under-assess this complex threat face the possibility of unsustainable loss ratios. Conversely, insurers that overvalue this risk will forfeit market share to less wary competitors. So how can an insurer determine when weather is just weather, and when it might be the manifestation of a changing climate? Any definitive answer to that question will require much more time and data, but the recent events near Lake Erie provide an interesting glimpse into how worldwide greenhouse gas emissions may have contributed to Buffalo roof collapses. The operative theory goes like this:
Phase 1: A Super-typhoon develops in the unseasonably warm waters of the western Pacific
Most scientists believe that warming ocean temperatures will lead to more volatile typhoons and hurricanes. The theory suggests that warmer seas will not only fuel more ferocious storms, but will also permit those storms to reach higher latitudes (Sandy and Irene). Interestingly, warmer ocean temperatures will not necessarily result in more frequent cyclonic activity, because warmer air also tends to create intense wind shear–the arch-enemy of hurricanes. But that is a story for another day….
On October 28th, a low pressure system developed east of the Territory of Guam. By November 2nd, fueled by exceptionally warm sea temperatures, it had morphed into Super-typhoon Nuri. With sustained winds of 180 mph, Nuri had quickly become the South Pacific equivalent of a strong Category 5 hurricane. As Nuri advanced into cooler waters, it necessarily weakened, eventually dispersing into a sprawling post-tropical storm.
Phase 2: An Arctic Bomb
On November 7th, the remnants of Nuri slammed into the Bering Sea, southwest of Alaska. Its immense strength was such that the atmospheric pressure dropped to 924 millibars, making it the most powerful measured storm to ever impact that region. This sharp drop in atmospheric pressure, characterized as an “atmospheric or cyclonic bomb,” resulted in 45 foot waves and hurricane force winds.
But the intense remnants of Nuri also did something else, something even more fascinating. It shoved the jet stream over the Bering Sea to the north, which propelled the Arctic-chilled jet stream over much of North America to the south. With the jet stream at an unusually low latitude, cold temperatures rushed down, blanketing the northern United States with abnormal sub-freezing weather.
Stage 3: Lots and lots of snow
Lake effect snow often occurs in the early winter when frigid air masses over warmer lake waters. As the warmer moist air rises, it forms clouds that can bring snow to areas within 100 miles of the lake. In late November, that phenomenon was in full effect when the Buffalo area received up to 90 inches of lake effect snow (over one year’s worth in a single week). Commerce was halted, roofs collapsed, and numerous evacuations were required, all resulting in untold millions of dollars in damage. Subsequent flooding and delays further contributed to the overall loss.
What Does It All Mean To Insurers?
As alluded to above, one of the things that makes the risk of climate change difficult to assess is that no particular weather event can ever be definitively linked to greenhouse gas emissions. But it is certainly worth noting that the circumstances now playing out in communities around Lake Erie appear to be the last link in a causal chain initiated by unusually warmer oceanic temperatures on the other side of the globe; and fall squarely within the type of adverse weather events that many scientists expect would be the result of a warmer world. While solving the complex climate change puzzle will take untold years, the recent events in Buffalo appear to present a tantalizing (and somewhat unnerving) clue.