The Impact of Climate Change on Catastrophe Risk Model : Implications for Catastrophe Risk Markets in Developing Countries
Catastrophe risk models allow insurers, reinsurers and governments to assess the risk of loss from catastrophic events, such as hurricanes. These models rely on computer technology and the latest earth and meteorological science information to gene...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090608163227 http://hdl.handle.net/10986/4152 |
| Summary: | Catastrophe risk models allow insurers,
reinsurers and governments to assess the risk of loss from
catastrophic events, such as hurricanes. These models rely
on computer technology and the latest earth and
meteorological science information to generate thousands if
not millions of simulated events. Recently observed
hurricane activity, particularly in the 2004 and 2005
hurricane seasons, in conjunction with recently published
scientific literature has led risk modelers to revisit their
hurricane models and develop climate conditioned hurricane
models. This paper discusses these climate conditioned
hurricane models and compares their risk estimates to those
of base normal hurricane models. This comparison shows that
the recent 50 year period of climate change has potentially
increased North Atlantic hurricane frequency by 30 percent.
However, such an increase in hurricane frequency would
result in an increase in risk to human property that is
equivalent to less than 10 years worth of US coastal
property growth. Increases in potential extreme losses
require the reinsurance industry to secure additional risk
capital for these peak risks, resulting in the short term in
lower risk capacity for developing countries. However,
reinsurers and investors in catastrophe securities may still
have a long-term interest in providing catastrophe coverage
in middle and low-income countries as this allows reinsurers
and investors to better diversify their catastrophe risk portfolios. |
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