Frankenstorm, The Not So Black Swan: Climate As The New Risk Variable

 | Nov 14, 2012 12:43AM ET

While waiting for the power to go out (which it did a couple of hours later) as we sat at home in Connecticut and Sandy approached, we read this comment by Elizabeth Kolbert in the New Yorker Blog:

As with any particular "weather-related loss event,” it’s impossible to attribute Sandy to climate change. However, it is possible to say that the storm fits the general pattern in North America, and indeed around the world, toward more extreme weather, a pattern that, increasingly, can be attributed to climate change. Just a few weeks before the Munich Re report appeared, scientists at NASA’s Goddard Institute for Space Studies, in New York, published press release from Munich Re that says, in part:

Nowhere in the world is the rising number of natural catastrophes more evident than in North America. The study shows a nearly quintupled number of weather-related loss events in North America for the past three decades, compared with an increase factor of 4 in Asia, 2.5 in Africa, 2 in Europe and 1.5 in South America.

Anthropogenic climate change is believed to contribute to this trend, though it influences various perils in different ways. Climate change particularly affects formation of heat-waves, droughts, intense precipitation events, and in the long run most probably also tropical cyclone intensity. The view that weather extremes are becoming more frequent and intense in various regions due to global warming is in keeping with current scientific findings, as set out in the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) as well as in the special report on weather extremes and disasters (SREX). Up to now, however, the increasing losses caused by weather related natural catastrophes have been primarily driven by socio-economic factors, such as population growth, urban sprawl and increasing wealth.

Don’t you just love it when insurance companies talk dirty?

Our suspicion is that we are now reaching the tipping point where people start to price their assets factoring in climate risks. Things don’t all have to be underwater for that to happen; it requires only for enough people to realize that it has become a risk greater than 0.05%, and that the risk is increasing.

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