The heat is on the risk sector as temperatures continue to rise

The week has been defined by soaring temperatures and wildfires across southern Europe and it looks very likely that things are set to get worse.

As thousands of tourists were evacuated from the Greek Island of Rhodes, there came warnings in the UK and the US that high temperatures and the risk of dry weather which will increase the risks of wildfires is to become a new norm.

Broker WTW issued research which points to the emerging El Niño causing wind drought in North America, which would have a significant effect on renewable energy production in the region.

The review flagged how different 2023 has been to date with five category five storms in the first five months. This year’s combination of El Niño and exceptional Atlantic warmth is expected to have significant impact on weather patterns and temperatures across the globe.

The review outlines key perils which it said need to be monitored as well as exploring the reasons why those natural catastrophes turned into a natural disaster, going beyond the severity of the event, and incorporating insights into exposure and vulnerabilities of the regions affected.

Helene Galy, managing director of the WTW Research Network, explained: “Our direct links and close collaboration with the scientific community through the WTW Research Network enables us to provide deeper insights into key natural catastrophes as well as lessons learned. When quantifying natural catastrophe risk, it is crucial to incorporate in-depth scientific analysis in our modelling. As we are seeing with the current wildfires and extreme weather across Europe, China and North America, the business impact of these disasters means it is crucial that risk managers understand their potential consequences, as well as learning lessons from previous events and the value and limits of seasonal forecasting. We are delighted to be introducing this latest bi-annual scientific review to help our clients understand and mitigate natural catastrophe risks.”

The research’s findings include:

> As the world warms, we continue to see natural disasters, such as the unprecedented Canadian wildfires that began in May and have burned over 11 million hectares to date.

> Human activities, such as land use, often exacerbate the impacts of natural disasters as we saw this year with the floods in New Zealand and Italy, and wildfires in Chile.

> Awareness needs to be raised about potential socio-economic tipping points, where gradual climate change leads to sudden socio-economic shifts such as the collapse of property prices.

> During an El Niño event, the atmosphere absorbs more heat while the ocean takes up less, and so two to three months after the event begins, global surface temperatures increase.

> For three years in a row, Earth’s largest ocean has been stuck in its La Niña configuration. Should the Pacific flip to El Niño, businesses should prepare for record-high temperatures, unusual weather, and slower economic growth.

The warnings were backed by the UK’s Met Office which issued its latest report on the weather patterns for 2022. It found that the 40C heat which was part of an extended heatwave and dry spell last year, is likely to become a far more regular occurrence.

If the Met office is to be believed if the UK is to suffer temperatures of 40c or above southern Europe is likely to see far higher temperatures.

The Met Office’s Oli Claydon explained: “It is evident that the climate is possible to reach 40C in the UK now, as we saw in a number of stations in July last year.

“The likelihood of exceeding it going forward somewhere in the UK in a given year is now increasing due to human-induced climate change. So as well as the need to mitigate against future climate change by reducing emissions of greenhouse gases, we’re already experiencing the impacts of climate change now, so there’s already a need to adapt to the types of weather extremes that we can see in the UK.”

Adapt and mitigate are words which strike fear in the hearts of risk managers and insurers as the impacts of a changing climate will come with extreme weather events but they drought, heat, wind or flood and the onus will be on the risk industry to come up with workable and affordable solutions.

Jon Guy, Editor,

Emerging Risks