Earth Observation and Global Change

Earth Observation and Global Change

April 22, 2008

AMS

Public Private Partnership Forum

Frank Nutter

Reinsurance Association of America

2005 – $103 B

2004 – $ 45 B

Of 20 most costly – 18 since 1990

1/3 of total insured risk is “cat” risk

NFIP

Black Swans?

Catastrophic Losses: An Insurance PerspectiveCatastrophic Losses: An Insurance PerspectiveCatastrophic Losses: An Insurance PerspectiveCatastrophic Losses: An Insurance Perspective

Attribution of LossesAttribution of Losses Urbanization

Values at Risk

Population Shift

Weather / Climate

Assessing RiskAssessing Risk RMS

AIR

EQE

Hierarchy of PerilsHierarchy of Perils

Peak

Off Peak

Secondary

US Hurricane

California Earthquake

European Wind

Japanese Earthquake

Japan Typhoon

Tornado/Hail

Floods

Storm Surge

Coastal Flooding

Inland Flooding

Tsunami

Fire Following Earthquake

An Insurer’s “Cat” Strategy An Insurer’s “Cat” Strategy Quantification of Risk

Pricing Risk

Hedging

A Progressive (Re)insurer’s Strategy A Progressive (Re)insurer’s Strategy Assess client climate exposure Sell catastrophic reinsurance Provide risk transfer products Capital markets products Weather derivatives Investment in alternative energy Carbon trading and guarantees Footprint Employee incentives

Research NeedsResearch Needs Extend the historical record Land fall probabilities with wind speed Storm tracks Correlations, if any, between regions Extremes and outliers Hurricane power/size Sea level rise and storm surge Potential for abrupt events

www.reinsurance.orgwww.reinsurance.orgwww.reinsurance.orgwww.reinsurance.org