With predictions for a highly active hurricane season in 2007, Trevor Maynard considers the ompact of climate change on natural catastrophes.

WEATHER-RELATED CATASTROPHES are costing the insurance industry more than ever before, and many believe climate change is causing them to be fiercer and more frequent.

Between the 1960s and 1990s the number of natural catastrophes – most of them weather-related – doubled, and insured losses increased nearly seven times. In 2005, we saw the worst year ever for property insurers, resulting in weather losses of more than $70bn. Tropical Storm Risk, Benfield’s London-based forecasting unit, predicts Atlantic basin and US land falling hurricane activity to be 75% above the 1950-2006 average when the season officially begins on 1 June.

A recent Lloyd’s report, “Rapid climate change”, highlights four key areas where insurance will be affected by climate change – sea level rise, melting icecaps, flood and drought. The experts who contributed to the report say that all four are going to get worse in the coming years.

So in this time of increasing risk and uncertainty, it is essential the insurance community has an accurate and balanced understanding of the risks involved. To do this, it is imperative that the insurance industry works with academia, government, and the wider business community to assess the risks and factor the latest science into its planning. There is a wealth of new research available, and while we can never hope to model for every possible future loss, we can no longer afford to be caught unprepared.

Lloyd’s has helped to create the Lighthill Risk Network, which aims to achieve exactly this. It is an organisation that brings together worldwide scientific research, business and third party organizations interested in risk, encouraging key experts to share their ideas.

Such communication is vital. Global models of the earth’s climate do not yet fully agree on the potential impacts of climate change. But they still contain much useful information and we urge scientists to start discussing extreme events and regional

impacts with the business community now rather than wait until their models agree. However, the scientists involved in our report tell us that climate models often do not pick up the full spectrum of risk and, in particular, can miss some of the more extreme events that are of concern to the insurance industry. Not having all the answers must not stop businesses preparing for a range of possible outcomes, even if some seems implausible.