Earlier this year, RMS partnered with the Risky Business Initiative, a year-long effort co-chaired by former New York City Mayor Michael Bloomberg, former Treasury Secretary Henry Paulson, and Farallon Capital founder Tom Steyer to quantify and publicize the economic risks the United States faces from the impacts of a changing climate.
The report, which launched today, has been widely covered in publications ranging from Fortune and The Wall Street Journal to The Hill. It builds on the best available scientific evidence, including both the Intergovernmental Panel on Climate Change (IPCC) and National Climate Assessments, to highlight the risks and cost a changing climate will bring to the business and financial communities the report addresses.
The report details the impact of climate change at the county, state, and regional level; it is the highly vulnerable coastal regions exposed to rising sea levels and the potential for changes in storm activity where RMS has been privileged to contribute our expertise and modeling.
RMS North Atlantic hurricane and storm surge models are based on a base climatology defined by the historical record of storms and represents the current state of the climate. Sea-level rise will increase the risks associated with storm surges and a changed climate may lead to changes in the frequency and intensity of hurricanes the impact the U.S. East Coast and Gulf States.
To address the potential impacts of such changes, RMS pulled together a cross-functional team from our model development group and consulting teams to implement the changes in storm frequency and sea-level rise in our model and analyze the impacts against our database of U.S. property exposure. The team worked with leading climate and hurricane experts and the Risky Business team to understand the latest scientific thinking and gather the information needed to adjust our model from the peer review literature.
In the space of just a few months, the team developed nearly 20 versions of our storm surge hazard model to reflect the expected increase in sea-level rise through the coming decades up to the year 2100, as well as the range of uncertainty captured by the latest IPCC assessment. In addition, the team developed several hundred alternative scenarios of hurricane frequency to model how hurricane frequency may evolve with different “Representative Concentration Pathways” used by the IPCC to describe possible climate futures, possible depending on how much greenhouse gas is emitted in the years to come.
The results of RMS’ analysis, quantifying the changes in losses to hurricanes and storm surges through the coming century have been fed into the Risky Business econometric modeling to quantify the cost to the U.S. economy.
Our analysis highlights that the sea-level rise alone – one of the most certain aspects of a warmer climate – has the potential to more than double the economic losses to hurricanes and storm surges by the end of the century if left unchecked.
RMS, along with Risky Business, recognizes that the analysis is not definitive; however, the potential costs can be quantified and the risks of in-action assessed. This collaboration has developed an invaluable database of information on the impacts climate change on hurricane risk, and by extension, the U.S. economy as a whole.
Just as the Risky Business Initiative hopes to promote a non-partisan discussion on the risks of climate change within the business and financial communities as a whole, RMS hopes that this work and our continued collaboration with the scientific community will lead to continued dialogue in the (re)insurance and catastrophe loss modeling community on the impact of climate change to our business.
Visit http://riskybusiness.org/ to view the full report.