Insurance Australia Group Ltd · ASX:IAG
Insurance Australia — ESG Presentation (November 2019)
39 slides from Insurance Australia's sustainability presentation, Nov 21, 2019
Slide 1: Investor presentation – Severe weather in a changing climate
News Release 21 November 2019 Investor presentation – Severe weather in a changing climate The attached presentation is being given today by members of IAG’s Natural Perils team to investors and other market participants. This follows the recent launch of Severe Weather in a Changing Climate, a repo
Slide 2: Severe Weather in a Changing Climate
Severe Weather in a Changing Climate Mark Leplastrier, EM Natural Perils Dr Bruce Buckley, Principal Meteorologist 21 November 2019
Slide 3: Agenda
Agenda • Report Context – Rationale and purpose – Relationship with NCAR • Climate Change and Weather Extremes – Regional interpretation, by event type • Implications for the Built Environment – Risk reduction opportunities • Summary Severe Weather in a Changing Climate 21 November 2019 2
Slide 4: Report context
Report context Developing a consistent framework Jointly authored with NCAR • National Center for Atmospheric Research, based in US • Research-based relationship with IAG since 2010 Understanding climate-related risks • Requires review and interpretation of the latest climate change science on how s
Slide 5: Climate Change and Weather Extremes: A Regional Interpretation
Climate Change and Weather Extremes: A Regional Interpretation Severe Weather in a Changing Climate 21 November 2019
Slide 6: Major Australian weather claim events since 1980
Major Australian weather claim events since 1980 Mixture of meteorological phenomena Date Event Type Loss ($m)* Rank Feb-83 Ash Wednesday bushfires Bushfire 1,762 4 Phenomena Number Jan-85 Brisbane hail storm Hail storm 2,274 2 Mar-90 North Sydney hail storm Hail storm 1,681 6 Tropical cyclone 2 Nov
Slide 7: Tropical cyclone trends
Tropical cyclone trends A global view by key ocean basins Severe Weather in a Changing Climate 21 November 2019 6 Source: Knutson et al, 2019
Slide 8: Observed cyclone trends
Observed cyclone trends An increasing proportion of stronger cyclones US Saffir-Simpson Hurricane Scale All cyclone basins, all available years since 1965 (Holland / Bruyère 2013) Cyclone % of risk % of Category category % of insurance % of premium annual annual premium frequency frequency 1 or less
Slide 9: Modelling of tropical cyclone intensity trends
Modelling of tropical cyclone intensity trends IAG / NCAR research indicates 20% increase in most intense TCs Decadal trends in most intense cyclones Preliminary research of most intense Coral and Tasman Sea tropical cyclones (135° to 180°E) • Actual intensities need to be scaled upwards to allow fo
Slide 10: Modelling tropical cyclone trends – east coast of Australia
Modelling tropical cyclone trends – east coast of Australia Southward shift evident Decadal trends: cyclone lifetime maximum intensity Coral and Tasman Sea tropical cyclones (135o to 180oE) • Southward shift of lifetime maximum intensity • Increase in tropical cyclones with maximum intensity at Bris
Slide 11: Rising sea temperatures
Rising sea temperatures 1oC warming >26oC can sustain a 1 Category intensity increase • Tropical cyclones draw their energy from the oceans • Warming seen at both region of peak intensity (Mid Coral Sea) and off Brisbane Mid Coral Sea East of Brisbane 3% 28 Severe Weather in a Changing Climate 21 No
Slide 12: Historical cyclones at today’s sea surface temperature
Historical cyclones at today’s sea surface temperature Observed 1°C increase implies more intense cyclones off SE Queensland 6 5 Mid Coral Sea 4 3 Historical TCs reached peak intensity at 21.5 oS 2 1 0 1 2 3 4 5 6 Off Brisbane 5 Brisbane latitude 4 3% 28 3 2 1 0 1 2 3 4 5 Historical intensities (pur
Slide 13: Varying tropical cyclone regional trends
Varying NT tropical + 0 + Far north QLD cyclone - 0 - regional Northern WA SW Pacific Central QLD + trends + 0 + 0 0 - - - Frequency changes: SE QLD/NE NSW from 1950s to +3oC scenario SW WA + + 0 0 - - Note: Cyclone Categories relate specifically to the wind component. Trends exclude the increasing
Slide 14: Severe thunderstorms: hail
Severe thunderstorms: hail First step: establish hail climatology from multiple data sources (1) Global view Regional view Source: Prein and Holland, 2018 Severe Weather in a Changing Climate 21 November 2019 13
Slide 15: Severe thunderstorms: hail
Severe thunderstorms: hail First step: establish hail climatology from multiple data sources (2) Bureau of Meteorology – large : giant hail ratios Radar + claims-based storm paths (Melbourne example) Severe Weather in a Changing Climate 21 November 2019 14
Slide 16: Severe thunderstorms: hail
Severe thunderstorms: hail Second step: apply knowledge of hail science – significant complexity Range of final scale features influencing large and giant hail Hail environment frequency trends • Poor initial hail / giant hail observational record (1979-2015, % movement / decade) • Instability chang
Slide 17: Severe thunderstorms
Severe thunderstorms Hail risk factors to +3oC Large hail = 2cm to 4.9cm Giant hail = > 5cm Less hail Higher melting level increased rain, Hotter squalls Deeper trough Moisture from Increase in ocean current damaging hail More north- Stronger updrafts south steering Warmer ocean current flow Drier i
Slide 18: Severe thunderstorms: regional hail trends
Severe thunderstorms Regional hail trends Central QLD + Brisbane 0 + - 0 1990-2010 +3oC - NE NSW Wheatbelt + + Western NSW 0 Perth 0 + Blue Mts - + - 0 + 0 - 0 - - Sydney Adelaide Canberra + + 0 + - 0 0 - - Melbourne Gippsland Note: Trends on this map exclude the general increasing wind squall and i
Slide 19: East coast lows – broad and complex
East coast lows – broad and complex The most extreme example: 21-25 June 1867 Queensland, NE NSW: widespread rain and Major floods Parramatta, storms Dozens of Wollondilly, Shoalhaven, people died Goulburn, Lachlan, Murrumbidgee and Clarence Rivers Hunter River: 1:100 year flood, storm damage Newcas
Slide 20: East coast lows: limited research
East coast lows: limited research Modelling indicates increased summer wind impacts Summer Winter Severe Weather in a Changing Climate 21 November 2019 19 Walsh et al. 2016
Slide 21: East coast lows – structures matter
East coast lows – structures matter Rare but damaging events, with adverse future trends • Rare events – once per decade, produce $1bn+ damage Assessed future trends of increased damage from • Fine scale structure is critical higher storm total rainfall, increased rain rate, wind-rain impacts and in
Slide 22: Rising sea levels
Rising sea levels Observed sea level trend 2006 to 2018 Global and regional variations Sea level rise to continue for more than a century Sea level rise projections: NOAA* report 2017 10 8 6 Notional +3oC values 4 2 0 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2120 2150 2200 Severe Weather in
Slide 23: Bushfire risk trends
Bushfire risk trends One of the fastest growing climate risks in Australia 1978 to 2017 Severe Weather in a Changing Climate 21 November 2019 22
Slide 24: Implications for the Built Environment
Implications for the Built Environment Severe Weather in a Changing Climate 21 November 2019
Slide 25: Property risk
What do we assume about the future built environment? Increased property risk Built environment scenarios Property risk No changes Risk reduction programs Hypothetical 1950 2000 2050 2100 Severe Weather in a Changing Climate 21 November 2019 24
Slide 26: Damage to homes – claims from recent cyclones
Damage to homes – claims from recent cyclones Major change in residential building codes in 1980 The cyclones in the analysis all had wind speeds less than the design level 1980 Severe Weather in a Changing Climate 21 November 2019 25
Slide 27: Retrofitting of existing building stock (cyclonic regions)
Retrofitting of existing building stock (cyclonic regions) Resists severe wind loads Queensland Household Resilience Program commenced 2018 • Upgrades and retrofitting to AS1684 • Work certified to National Construction Code (NCC) reference documents • Applies to cyclonic regions north of Bundaberg
Slide 28: Current building standards
Current building standards Ongoing refinements • Changes to cladding standard (AS1562.1) include minimum requirements for material, strength, thickness and fastener spacings for all flashings for all wind regions • New garage door testing and design requirements for cyclone regions Collaborative wat
Slide 29: Planning for a resilient future
Planning for a resilient future Working with government to reflect flood risk Townsville example 1% chance-per-year flood extent (used to define planning controls) Largest possible flood extent Severe Weather in a Changing Climate 21 November 2019 28
Slide 30: Implications for flood planning
Implications for flood planning Increased frequency of impacts on new subdivisions • Old suburbs below flood planning level • New subdivisions filled to minimum • Built 1940-2000s flood planning level • Built 2003-2019 • Mix of high- and low-set homes • Mostly slab-on-grade • Often resilient constru
Slide 31: Property-level peril risk assessment
Property-level peril risk assessment Stepped approach to changing risk, starting with science Scientific review Change in weather Catastrophe models extremes • Tropical cyclone • Bushfire • Storm surge frequency/intensity • Storm / hail / east coast low • Sea level rise • Flood / storm surge • East
Slide 32: Regional variations in climate sensitivity
Regional variations in climate sensitivity Change in annual average loss vs current climate Cairns, Townsville +2°C: +5% Broome, Port Hedland +3°C: -1% +2°C: -12% +3°C: -23% Note that some important features that are likely to change Gold Coast, have not been included, e.g. Sunshine Coast additional
Slide 33: Regional variations in climate sensitivity
Regional variations in climate sensitivity Average annual loss per property: current, +2°C and +3°C scenarios Severe Weather in a Changing Climate 21 November 2019 32
Slide 34: Sensitivity of extreme risks
Sensitivity of extreme risks Gold Coast example 280% increase in properties at extreme risk under +3° scenario °C °C Severe Weather in a Changing Climate 21 November 2019 33
Slide 35: Variation within regions
Variation within regions Based on northern NSW Hyper-local sensitivity Property Characteristics Change in Change in risk risk (% of average (% of average annual loss) annual loss) +2°C scenario +3°C scenario Not in flood plain or storm +33% +83% surge zones Within flood plain not affected by sea +50
Slide 36: Driving risk reduction
Driving risk reduction Life cycle of a property Severe Weather in a Changing Climate 21 November 2019 35
Slide 37: Driving risk reduction
Driving risk reduction Ideal life cycle of a property Severe Weather in a Changing Climate 21 November 2019 36
Slide 38: Concluding remarks
Concluding remarks Science – Climate change is here, now, accelerating – Our current trajectory is alarming – There is enough knowledge to derive indicative future impacts Different perils, different rates of change, different community sensitivities to peril changes – Impacts will be highly skewed,
Slide 39: Severe Weather in a Changing Climate
Severe Weather in a Changing Climate Download report on IAG website https://www.iag.com.au/severe- weather-changing-climate Severe Weather in a Changing Climate 21 November 2019
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