Homeowners may feel heat of global warming
Insurers studying impact on rates
Global warming could soon hit homeowners in the pocketbook.
An influential but little known segment of the insurance industry is considering whether climate change might be partly to blame for more intense hurricanes in the North Atlantic. The result of this examination, which comes as scientists debate the same question, could be skyrocketing insurance rates in coastal regions from Maine to Texas.
Already, one leading company that forecasts the risk of natural disasters for the insurance industry has revamped the computer model it uses to simulate future weather trends. The model, which looks five years out, now captures the possibility that global warming might be contributing to hurricane activity.
Risk Management Solutions released the new model in May, predicting that average annual insurance losses will increase 25 to 30 percent in the coastal Northeast because of increased hurricane activity.
Florida state officials are researching whether they should add a climate change component to an insurance hurricane risk model they have developed. And Boston-based AIR Worldwide Corp., another top risk modeler, is launching a study with Massachusetts Institute of Technology scientist Kerry Emanuel to understand global warming's impact on hurricanes and whether insurance risk will rise as a result.
``It behooves us to research this in a scientific way," said Karen Clark, president and chief executive officer of AIR Worldwide. ``We want to quantify the effect of global warming on hurricane activity."
The confidential risk models that private companies like AIR and Risk Management Solutions develop are key factors in the price of homeowners insurance bought by many coastal residents. The modelers calculate the risk from hurricanes, earthquakes, and other natural hazards to homes and businesses in a region that takes into account everything from construction material to wind speeds. Insurance providers often use the predictions as an important piece in a complicated formula to set rates.
If global warming is driving more intense hurricanes -- and more of those hurricanes hit land -- it could drastically increase the risk of property loss along crowded coasts.
A year ago, just before Katrina struck the Gulf Coast, MIT'S Emanuel published a controversial paper in Nature, a prominent journal, that said, in part, that hurricanes were getting more intense in the North Atlantic and human-caused global warming was probably the cause. His work set off a firestorm in the scientific world.
Although most scientists agree North Atlantic hurricane activity has increased since 1995, there is no consensus on why. Some side with Emanuel, but others say the hurricane activity is part of a natural cycle that will probably end within 25 years.
``These are important questions to resolve," said Robert W. Klein, director of the Center for Risk Management and Insurance Research at Georgia State University. ``It's clear we weren't using the right models before Katrina and Rita struck."
Hurricanes are fueled by warm ocean waters. Heat and moisture rise into the atmosphere, causing winds near the ocean surface to spiral air inward, gathering more moisture and heat energy. If conditions remain ideal, the telltale hurricane whorl forms and grows stronger as it picks up even more energy from the ocean surface.
Many scientists agree that warmer ocean temperatures will probably fuel more intense hurricanes. And they note that tropical sea surface temperatures have risen about 1 degree Fahrenheit over the last 35 years. But critics of the global warming link say the data are still too shaky for them to conclude whether rising water temperatures are caused by global warming or a natural cycle that also occurred in the 1950s. There is a consensus among a large number of scientists, however, that the world's warming temperatures largely stem from the burning of fossil fuels, such as in power plants and cars, that can trap heat in the atmosphere.
A report in Science late last month by Christopher Landsea of the National Hurricane Center said researchers like Emanuel did not factor in the possibility that older technology may have underestimated storms' power years ago, making the conclusions about increasing storm intensity unreliable. Other researchers have also challenged Emanuel's data, saying that, among other things, his findings had a wide margin of error.
Emanuel says that some of the data do have large margins of error, but the trend is extraordinarily clear: As oceans warm because of global warming, hurricanes are getting more intense.
His research last year concluded that the destructive power of hurricanes in the North Atlantic and North Pacific has nearly doubled over the past 30 years. In another study, a group of other scientists based largely at the Georgia Institute of Technology concluded that while the number of hurricanes in the world did not increase in the last 35 years, there was a doubling of the frequency of the most intense hurricanes -- categories 4 and 5.
Traditionally, risk modelers have looked at storm records, which now extend back more than 100 years, because they assumed that frequency and strength of natural catastrophes tend to average out over the long term.
But the 2004 and 2005 hurricane seasons, which caused total estimated losses of $90 billion, made modelers reconsider their methods. At the same time, research such as Emanuel's began linking a warming earth to more intense hurricanes.
In part to deal with this problem, Risk Management Solutions convened a panel of four specialists, including Emanuel, in Bermuda last October to discuss, among other things, what was causing recent hurricane activity and how many storms might hit land.
Aided by the scientists, RMS came to the conclusion that the current period of hurricane activity is so different from the long-term record it didn't make sense anymore to base its models on only the past. In May, the company announced a new model that incorporated the specialists' opinions and the more recent spate of hurricanes, among other changes.
Hurricane intensity is an area of fierce academic debate," said Josh Darr, senior manager for the US hurricane model at RMS. Darr says his company has no opinion about what is causing the increased hurricane activity but felt compelled to create a more nimble model that would factor in more recent, and potentially changing, climatic conditions to better predict losses.
Not everyone agrees with Risk Management Solutions -- including two consumer groups that have charged the company with altering its formula to give the insurance industry higher profits.
Other modelers have, at least so far, taken a more conservative view. EQECAT, another well-known modeler, says that the correlation to global warming is not clear.
Insurance providers -- and states that approve insurance rates -- use the models to varying degrees, with some embracing a single modeling company's forecast and others using a combination of the companies' predictions. Some don't use the models at all because without access to the companies' proprietary information, officials don't understand exactly how they work.
AIR Worldwide so far is assuming that the current cycle is probably a repeat of the period of intense hurricane activity in the 1950s. Clark, AIR's president, says any increased risk has more to do with the growing population along the coast and the rising value of homes there.
``The biggest driver is increases in square footages of the average house; they are 200 to 300 square feet larger," Clark said. Even the scientists who are battling over the cause of hurricane intensity agree with her: On Emanuel's website, he and a group of scientists on either side of the debate signed a letter saying that no matter what the reasons for the hurricane activity, the biggest hurricane threat is the increasing concentration of population and wealth along the coasts.
Still, Clark said the possibility that global warming may be contributing to the problem can't be ignored and that's why they are launching the study with Emanuel.
Ultimately, the problem modelers face is figuring out a short-term prediction from a long-term trend.
``The problem is that scientists talk about climate change in terms of 25, 50, or more years; they are not willing to make predictions about five years," said Howard Kunreuther, co-director of the Risk Management and Decision Processes Center at the University of Pennsylvania's Wharton School. ``The insurance industry is most interested in knowing what is likely to happen in the next few years as they determine what premiums to set on their coverage against hurricanes and other natural disasters."
Beth Daley can be reached at bdaley@globe.com 