Aon: Climate change could increase US hurricane losses
US hurricane losses could increase by at least 10% over 20 years as a result of climate change, a study by insurance broker Aon and Columbia University shows.
Aon also said studies with the University of California confirmed that rising temperatures combined with peripheral development would lead to significantly increased fire risk in many areas.
The studies are among 14 academic collaborations carried out with Aon aimed at bringing emerging climate research directly to the insurance industry, to enhance risk understanding and create actionable insights to build physical resilience, transition to net zero and identify growth opportunities.
Aon said: "Output from the collaborations can also benefit other corporations with climate risk exposures, particularly when addressing increasing regulatory mandates."
Liz Henderson, leader of Aon’s climate risk advisory team, said: “Through collaborations with academic institutions, Aon is enhancing its understanding of climate science and using this knowledge to help our clients and the wider industry navigate climate change, become more resilient, seize new opportunities and make better risk decisions.
"Furthermore, we are assisting clients to meet their ESG mandates through the development of effective and informed internal and external stakeholder communications strategies, including robust responses to regulatory disclosure requirements.”
Aon said Columbia University had explored different ways to quantify moisture in the air and this has a notable impact on how the frequency of hurricanes could change in the future.
"Columbia has also run several shared socioeconomic pathways scenarios with different climate policy assumptions to assess the impact of varying levels of future greenhouse gases and aerosols," Aon said. "The team found that higher aerosol emissions led to fewer tropical cyclones. Such data will be incorporated into Aon’s tropical cyclone models to better assess future financial losses."
Aon said US wildfire risks would increase: "Recent historic US drought conditions are consistent with the output of climate models, which project a hotter, drier western hemisphere due to increased greenhouse gases. Peripheral development in at-risk areas coupled with these drier conditions is expected to significantly increase fire risk in many areas.
"Aon’s continuing collaboration with the University of California, Merced and University of California, Los Angeles examine how these anticipated climatic changes will affect the burned area and associated insured loss in wildfire events."
Studies by Aon with the Karlsruhe Institute of Technology (KIT) found that extreme hydrological events depend on climate change but also strongly depend on catchment size and physical features of the terrain.
Aon said: "For example, heavy rainfall in highly permeable areas can cause insignificant flooding, while the same rainfall in areas with narrow valleys can cause a catastrophe — as confirmed by the devastating Bernd flood in Germany in July 2021. Such terrain effects are now being incorporated into Impact Forecasting catastrophe models to help insurers better forecast potential losses."
Aon said Impact Forecasting will rebuild its catastrophe modelling suite to incorporate climate considerations, rather than making frequency adjustments to existing loss scenarios.
"These models will enable forward-looking hazard data for different climate scenarios and inform climate advisory frameworks to help insurers make better business decisions," Aon said. "These tools are being expanded to better manage physical risk for financial institutions, governments and energy sectors."
