Boston’s New Big Dig: How does U.S. winter storm risk impact your portfolio?

BOSTON’S NEW BIG DIG: HOW DOES U.S. WINTER STORM RISK IMPACT YOUR PORTFOLIO Robert Muir-Wood, Chief Research Officer

Matt Nielsen, Senior Director, Global Governmental and Regulatory Affairs

Jeff Waters, Manager, Model Product Strategy

2 Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 13, 2015

Agenda 2014-2015 U.S. Winters

U.S. and Canada Winter Storm Risk

Key Questions and On-going Issues


Presenters

Robert Muir-Wood, Chief Research Officer

Matt Nielsen, Senior Director, Global Governmental and Regulatory Affairs

Jeff Waters, Manager, Model Product Strategy


2014-2015 U.S. WINTERS


2014-2015 U.S. WINTERS AT A GLANCE

Many causes of damage: •  Roof collapse •  Frozen pipes •  Business

interruption

2013-2014 •  13 PCS events

•  $2.3 billion in insured losses

•  Nearly 75% caused by one event (Jan. 5-8)

2014-2015 •  8 PCS events

•  $2.2 billion in insured losses

•  Numerous snowfall and temperature records

2014-2015 U.S. WINTERS AT A GLANCE

6 Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 13, 2015 Copyright © 2015 Risk Management Solutions, Inc.

Colder, Arctic air

-12

-8

-6

-3

WHY HAVE THEY BEEN SO ACTIVE? •  Neutral ENSO

conditions

•  Jet stream dipped into the central and eastern parts of the U.S., and stayed there

•  Allowed prolonged periods of arctic air to settle into the region


WHAT DOES THE POLAR VORTEX HAVE TO DO WITH IT? •  Polar vortex is

not a storm, but a flow of Arctic winds around the pole

•  Helps reinforce

the “waviness” of the polar jet stream

•  Led to the resulting cold-air outbreaks in 2013-2014 and 2014-2015


$-

$1

$2

$3

$4

$5

$6

$7

$8

Bill

ions

U.S. Insured Losses due to Winter Storms – 1983-2015 (2015 USD)

HOW DO RECENT SEASONS COMPARE TO THOSE IN THE PAST?

Losses from recent seasons are in line with long-term average annual winter storm losses

Also in line with modeled return periods: ~3 yrs.

Much higher losses during parts of the 1980s and 1990s

Lower losses during the 2000s

RMS AAL

Source: PCS, RMS

$-

$5

$10

Bill

ions

U.S. Insured Losses due to Winterstorms – 1983-2015 (2015 USD)


The 1983 Freeze Outbreak lasted nearly two weeks and affected more than 40 states

Recent events have caused material losses, but they could have been worse

Return Period

57

22

10

9

9

8

5

5

4

$0 $2 $4 $6 $8

2015 Feb. 16-22 Event

2014 "Polar Vortex" Event

1996 Ohio Valley Snowstorm

1992 Nor'easter

1994 Major Winterstorm

1989 Freeze Outbreak


1993 Storm of the Century


Billions

Insured Losses: Select Historical Events 1983-2015 (2015 USD)

HOW DO RECENT SEASONS COMPARE TO THOSE IN THE PAST?


U.S. AND CANADA WINTER STORM RISK


WINTER STORM RISK OVERVIEW

§  Contributes to a material percentage of overall U.S. and Canada AAL

§  U.S. $2.3 billion USD

§  Canada $400 million CAD

§  Caused more than $21 billion in insured losses since 2000

§  Large losses are driven by a single event or a combination of events throughout the season

§  Most loss is retained by primary insurers

U.S. winter storm AAL comparable to earthquake and flood Canada winter storm AAL comparable to SCS and 1/3 of all-peril AAL

Sources: RMS, NFIP, PCS


Dominant winter storm perils by region Material driver of catastrophe risk in the Northeast and Pacific Northwest

Lake Effect Snowstorms

Freeze

Snow

Wind

Snow

Ice

Ice

Snow

Wind

Freeze

Snow

Wind

Ice


WINTER STORM RISK BY PERIL

Drivers of Risk •  U.S. - freeze •  Canada - ice Drivers of Damage •  Freeze: pipe burst,

agriculture

•  Snow: roof collapse, ice damming

•  Ice: tree fall, power outage

•  Wind: tree fall, roof damage

18%

17%

31%

34%

AAL

17%

21%

18%

44%

100-year

20%

22%

17%

41%

250-year

Snow Ice Wind Freeze

U.S.


WINTERSTORM RISK BY PERIL

Drivers of Risk •  U.S. - freeze •  Canada - ice Drivers of Damage •  Freeze: pipe burst,

agriculture

•  Snow: roof collapse, ice damming

•  Ice: tree fall, power outage

•  Wind: tree fall, roof damage

18%

17%

31%

34%

AAL

17%

21%

18%

44%

100-year

20%

22%

17%

41%

250-year


19%

42%

30%

9% 15%

55%

21%

9% 12%

66%

15%

7%


U.S.

Canada


WINTER STORM RISK INDICES Snowfall and absolute temperature cannot be used directly for hazard determination

n  Does -15F cause the same damage everywhere?

n  Building code guidelines different

n  Create a Freeze Index - departure from 2-year return period

n  Create a Snow Index - departure from 25-year return period

NY, NY

-15F -15F

Dallas, TX


KEY QUESTIONS AND ONGOING ISSUES

16


POTENTIAL IMPACT OF CLIMATE CHANGE ON WINTER STORM RISK

In a warming climate, the jet stream winds may weaken, sending colder air plunging southward This may lead to higher volatility in cold air outbreaks

Boston’s New Big Dig: How does U.S. winter storm risk impact your portfolio?

Economy & Finance

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