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Climate change seen boosting European winter storms, damage

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While the threat of severe winter storms in Europe is expected to be low this season, some experts believe that climate change will lead to more frequent and intense winter storms, causing increased damage in the long term.

A recent Swiss Reinsurance Co. report on the impact of climate change on winter storms estimates that claims will increase by 16% to 68% by 2085.

Major storms that are currently viewed as 1-in-100-year events may become 60- or 70-year events in the decades to come, Swiss Re reported. Awareness of the exposure has put pressure on the natural catastrophe insurance market in Europe, said Brian Gray, head of property at Swiss Re.

"The exposure is perceived to be bigger and drives more of the total cost than it used to, in comparison to the old-fashioned fire and explosion risk," Mr. Gray said. "It just increases the focus of the industry and ultimately of the individual risk managers on the storm peril."

Indeed, some risks managers say large companies are already keenly aware of the risk posed by winter storms.

Catastrophe provisions

"If they have any property exposure to that type of natural catastrophe (in Europe), I think they've certainly made provisions for it," said Ralf Oelssner, chairman of the Deutscher Versicherungs-Schutzverband e.V.--the German commercial insurance buyers' association--and director of corporate insurance at Cologne, Germany-based airline Deutsche Lufthansa A.G.

Windstorm Lothar, which caused major damage in December 1999 and resulted in insured losses of about e5 billion ($5.20 billion), served as a wakeup call for risk managers in Germany, Mr. Oelssner said.

In Denmark, however, winter storms do not rank high among the leading business risks, said Charlotte Enggaard, chairwoman of Dansk Industris Risk Management Forening, the country's risk management association.

Risk managers are following developments, but "I don't think it is (a risk in) the top 10 in Denmark," said Ms. Enggaard, the risk management director at Carlsberg Breweries in Copenhagen.

With so much attention focused on hurricane risk in the North Atlantic--with predictions for an active season in 2007--David Bresch, Swiss Re's head of atmospheric perils, believes the increasing risk posed by European winter storms is being overlooked.

The changes "are gradual and that makes it even more dangerous," Mr. Bresch said.

In the study, natural perils experts from Swiss Re and scientists from the Swiss Federal Institute of Technology in Zurich combined several climatic models with a model for insured losses. Per year, the change in risk is less than 1%, but over 100 years it is in the order of a 60% change, Mr. Bresch said, "and that is quite something."

The report's findings have been integrated into Swiss Re's underwriting system and already impact its capacity deployment, Mr. Bresch said.

"Now, as the change is small per year, it doesn't have a big impact," he said. Still, Swiss Re intends to discuss the increasing risk with clients, a dialogue that began at this year's renewals, Mr. Bresch said.

Not everyone agrees with Swiss Re's views. Munich Re Group, for instance, agrees that winter storms will become more intense over time. However, some research suggests that the overall number of storms will not increase, with one study predicting a slight reduction, said Eberhard Faust, Munich Re's head of climate risks in its GeoRisks Research department.

"There is no doubt, of course, that global warming will impact wind storm climatology, so we are completely in the same line with Swiss Re with respect to this," Mr. Faust said. "But with respect to the hazard situation over...the next 10 years, there is currently no scientific study available supporting that this will be the prevailing influence."

Atmospheric pressure

In the nearer term, the North Atlantic oscillation--a fluctuation in atmospheric pressure between the North Atlantic's Icelandic low pressure and the Azores' high pressure regions--will be the most dominant factor on winter climate, according to Mr. Faust and Mark Saunders, professor of climate prediction in the department of space and climate physics at University College London.

"Over the next decade or two, I think the main influence will continue to be the NAO, as it has been since reliable records began," said Mr. Saunders, who is also head of weather and climate extremes at the Benfield UCL Hazard Research Centre in London.

The influence of the NAO over the past decade has translated into fewer winter storms over Europe, he said. "Whether climate change will have an effect on the frequency and intensity of European winter storms I think is still open for debate," he added.

Earlier this year, the Benfield center issued a European winter forecast based on the North Atlantic oscillation. For December through February, it predicted a milder and wetter winter over northwest Europe, with wind speeds 10% to 20% below normal.

Last winter saw wind speeds 40% below normal over most of Europe. "I wouldn't expect any really major damage from wind speed this winter," Mr. Saunders said. "The risk is higher than last winter, but nothing major, in my feeling."

Swiss Re's Mr. Bresch agrees with others that the NAO will be a main factor for climate variability in the short term.

The focus report "The effects of climate change: Storm damage in Europe on the rise" can be found at www.swissre.com.