Climate Risks

Changes in Atlantic hurricane activity and implications for decision makers

Researchers: Iris Grossmann, Granger Morgan, Carnegie Mellon University; Erwann Michel-Kerjan, Howard Kunreuther, Wharton School, University of Pennsylvania

Losses from Atlantic hurricanes have increased dramatically in the US over the last few decades [1]. This may be due to a combination of increased exposure in coastal areas and changes in climate. It is unclear how much of the latter change may be due to global warming and how much is related to a large-scale, natural shift in the Atlantic atmosphere-ocean environment in the mid-1990s [2].

Possible impacts of global warming on Atlantic hurricanes will depend on factors including oceanic and atmospheric warming, potential increases in unfavorable wind shear and decreases in atmospheric moisture [2]. Recent high resolution model projections suggest that the overall frequency of Atlantic hurricanes may decrease while the average intensity may increase [3,4]. It is difficult to verify whether any changes in hurricane activity have taken place till date due to the lack of a long-term consistent and reliable data set of hurricane observations [2]. We are working on this latter question with collaborators at the Carnegie Mellon Department of Statistics. We have also produced an extensive review and discussion of the state of the science on hurricanes and global warming.  

Irrespective of the existence and nature of global warming impacts on hurricanes decision makers have to deal with considerable interannual variability in hurricane activity and damages. With the shift of the Atlantic Multidecadal Oscillation (AMO) to its “active” phase in the mid-1990s, landfall risks are expected to be several times higher than during the “inactive” phase [5,6]. Given the long phase length of the AMO (i.e. ca 55-70 years for one complete oscillation), the existence of the AMO as a robust climate mode has not been definitely confirmed till date. We discuss this problem, causes of the AMO and evidence of its manifestation in variables such as North Atlantic salinity, sea ice, sea surface temperatures, wind patterns and Atlantic hurricanes in a collaborative publication with the Tropical Meteorology Project of Colorado State University [7].

Our work suggests that while it is not currently possible to clearly attribute the recent increase in intense Atlantic hurricanes to either natural variability or anthropogenic climate change and to assess how large a role each may play in the future, it is possible to identify characteristics of hurricane risks that are highly plausible and that we need to prepare for based on what we know. Decision makers can reduce vulnerabilities by considering different plausible descriptions of current and future risks and asking how we should respond to each if we knew with certainty that this is the situation we are facing.    A recent publication of postdoctoral research fellow Iris Grossmann discusses such a robust approach [6]. 

[1] Pielke, R.A. Jr., Gratz, J., Landsea, C.W., Collins, D., Saunders, M.A., Musulin, R., 2007. Normalized hurricane damage in the United States: 1900-2005. Nat Hazards Rev 9 (1): 29-42.
[2] Grossmann, I. Morgan, M.G. (2008). Tropical Cyclones, Climate Change, and Scientific Uncertainty: What do we know, what does it mean, what should be done? Climate Decision Making Center Report, 61pp, November 2008.
[3] Knutson, T.R., Sirutis, J.J., Garner, S.T., Vecchi, G.A., Held, I.M. (2008). Simulated reduction in Atlantic hurricane frequency under twenty-first-century warming conditions. Nature Geoscience 1: 359-364.
[4] Emanuel, K., Sundararajan R., Williams J. (2008). Hurricanes and global warming: Results from downscaling IPCC AR4 simulations. Bull Amer Meteor Soc 89: 347-367. 
[5] Klotzbach, P.J., Gray, W.M. (2008). Multidecadal variability in North Atlantic tropical cyclone activity J Climate 21: 3929-3935
[6] Grossmann, I., 2009. Atlantic hurricane risks: preparing for the plausible. Environmental Science and Technology43 (20): 7604–7608
[7] Grossmann, I., Klotzbach, P., 2009. A Review of North Atlantic Modes of Natural Variability and Their Driving Mechanisms. Journal of Geophysical Research-Atmospheres (in press)

Decision Needs in the Insurance Industry

Researchers: Erwann Michel-Kerjan, Howard Kunreuther, Wharton School, University of Pennsylvania; Daniel Hoffman (formerly of Swiss Re); Granger Morgan, Carnegie Mellon University

Insurance is a way of spreading risk and encouraging investments in protective measures to reduce the chance of and potential losses from an untoward event in the future. It is one of the principal mechanisms used by individuals and organizations to manage risks.

In most developed countries, the insurance and reinsurance (companies that provide insurance to other insurance companies) industry constitutes an important pillar of economic development and stability. The industry, especially its reinsurance portion, faces at least three different types of risks associated with climate change.

First, extreme weather events such as hurricanes and earthquakes impact the insurance industry by increasing risks to health, life and property. Climate change is expected to worsen the situation by increasing the frequency and severity of these natural disasters and leading to the spread of tropical diseases due to warming temperatures. These direct effects of climate change will impact the insurance industry negatively.

Second, the industry manages a large amount of money, dealing with its own investments and acting as a third party administrator for others. The negative effects of climate change will in turn reduce the value of these investments, thus indirectly impacting the insurance industry.

Third, the industry will be asked to underwrite new technologies—including carbon sequestration, hydrogen vehicles, and carbon trading—that are introduced in response to policies designed to limit climate change. The financial risk associated with these technologies is unknown.

We plan to develop a set of decision-related tools for insurance managers who are faced with these direct and indirect effects. Sometimes, private insurance companies might not have the resources to cover certain areas or certain weather catastrophes. In that case, the government could help, but they would have to collaborate with the insurance companies who know how the market works. We are also analyzing the potential of such public-private partnerships and how they could be formed.

By collaborating with participants drawn from the private sector, academic community and international organizations, we hope to identify and revise a set of research needs. To do this, we are holding a series of telephone and face-to-face meetings and holding workshops with these individuals.

Insuring Against Global Warming

More Coming Soon

Public Outreach Materials - 2006 (pdf)



Climate Decision Making Center 2009