Strange weather we’re having

Written by Ciaran Ryan. Posted in Journalism













This article first appeared in Moneyweb.

Whether you believe in man-made climate change theories or not, what is undeniable is that extreme weather events are on the increase.

We don’t have to look too far for evidence. In SA alone, there were three main catastrophic events over the last year – the fires in Knysna, the drought in the Western Cape, and storms in Gauteng and Kwazulu-Natal (including a tornado near Johannesburg). The average for much of the last decade has been one such event a year.

JSE-listed Santam is a reasonable proxy for the short-term insurance sector. The accompanying graph shows a marked spike in catastrophe claims in 2017, relating mainly to the aforementioned floods, storms and fires. The insurer incurred gross claims of R823 million from the Knysna and Western Cape fire, and R1.1 billion from storms in Kwazulu-Natal and Gauteng.

Santam catastrophic claims 2017

Source: Santam analysts presentation 2017

What is more interesting about the graph is the trend since 2012. It clearly shows a fundamental change in the overall level of catastrophe claims in the last six years. Something is clearly going on with the weather.

Nor are these trends confined to SA. Last year was the worst on record for weather-related insurance losses globally, according to global risk and insurance giant Aon. Its Weather, Climate & Catastrophe Insight 2017 reports that weather-related losses totalled US$344 billion, more than double the previous year. “The third quarter of 2017 was the second-costliest quarter ever registered at US$261 billion due to catastrophic damage caused by a trio of major hurricanes and flooding across Asia,” says the report.

Source: Aon’s Weather, Climate & Catastrophe Insight 2017

At a recent panel discussion on how extreme weather is affecting insurers, hosted by Norton Rose Fulbright in Sandton, Professor Coleen Vogel of the Global Change Institute at Wits University presented evidence that Africa is experiencing more extreme weather changes than the rest of the world: average temperatures on the continent are rising 0.11 degrees centigrade each decade, double the rate of the rest of the world.

“When you get an average two-degree rise in temperatures, you have problems. If it hits five degrees, we’re in real trouble,” she said.

These temperature rises create feedback loops that impact drainage and wetland systems and infrastructure. Urban over-crowding and bad construction practices, such as dumping rubble alongside the Jukskei River, aggravate an already fragile natural balance. Vogel says extreme rainfall is projected to increase in southern Africa, creating more intense thunderstorms that will degrade roads and dwellings.

Source: Aon’s Weather, Climate & Catastrophe Insight 2017

Michael Chronis, director of Norton Rose Fulbright, points out that engineers may have to look at how they design roads and other infrastructure in light of extreme weather event statistics. “I think we are looking at an increase in the number and the value of claims based on these trends,” he says.

Simon Robinson, head of specialist property at Bryte Insurance, says based on these trends, insurers may in future be asking clients for risk improvement actions such as retrofitting buildings to withstand more extreme storms. So far, there is little evidence of future expected extreme weather events priced into premiums, as these are largely based on historical data. “The solution is to take a proactive approach to limit the likelihood of catastrophic damage by engaging with clients and making sure that they are prepared for these kinds of events. What we need to work on is early warning systems, so we have better predictions when extreme weather events are likely to occur,” he says.

Though extreme weather events might be localised, what happens in Europe or the US impacts the price of insurance in SA, since all insurers are required to purchase reinsurance, which reflects global rather than local events.

Aon’s Weather, Climate & Catastrophe Insight 2017 says there were 330 natural catastrophe events in 2017 that generated economic losses of US$353 billion, of which 97% were weather-related. These events included Hurricanes Harvey, Irma and Maria in the US and Caribbean, Typhoon Hato in China, and Cyclone Debbie in Australia. Natural catastrophe losses in 2017 were 93% higher than the 2000-2016 average.

Panelists at the Norton Rose Fulbright discussion argued that no single entity, least of all insurers, could solve the problems of extreme weather alone. What’s needed is a coordinated approach with city and provincial planners to better predict adverse weather events, and provide better pre-emptive action when such events occur.

One need only look at the potholes that mark the roads after a severe thunderstorm. Or roof collapses. This is likely to be the pattern going forward. Road builders, engineers, and architects are going to have to get in on the act if the weather of recent years is any prediction of what is to come.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.