Foul Weather

During the first seven months of 2008, there were 1,390 confirmed reports of tornadoes, according to the Storm Prediction Center. Considering that the national yearly average number of tornadoes is roughly 1,000, this preliminary number is well above normal. Moreover, it is on pace to challenge the yearly record of 1,819 set in 2004.

Between 1851 and 2006, the yearly average number of major hurricanes — defined as Category 3 or higher on the Saffir-Simpson scale — in the Atlantic Basin was 1.8. This number has doubled to 3.6 for the most recent period of 1997 to 2006. In addition, between 1851 and 2006, the average yearly number of tropical storm systems was 8.7. That has increased to 14.5 for the period between 1997 to 2006.

So why is this important to the insurance industry? Between 1987 and 2006, tropical systems and tornadoes represented the top two catastrophic losses for the insurance industry. Tropical systems accounted for 45.6 percent of all catastrophic losses, while tornadoes accounted for 26.5 percent. The increase in frequency of these two destructive weather forces will no doubt increase the frequency of catastrophic losses to insurance companies in the future.

Appetite for Destruction

The big question is, why is the climate changing and becoming more destructive? The evidence convincingly suggests the Earth's warming is responsible for significant changes in climate. Since 1880, the 14 warmest years on record all occurred after 1990. The seven warmest years were 2005, 1998, 2002, 2003, 2007, 2006, and 2004, respectively. Over the past century, Earth's average temperature has increased by approximately 1.4 degrees Fahrenheit.

Aside from an overall increase in temperature, a warmer Earth has two significant impacts on the atmosphere. For one, a higher temperature results in higher evaporation rates. Second, the warmer the atmosphere, the more moisture it can retain. These two work in tandem to produce storm systems that release more precipitation over a shorter period of time. The end result is a greater frequency of flooding and heavier snows or icing in northern climates. Increased evaporation rates will have an opposite effect in areas that are subject to prolonged periods of dry weather. The result is more severe and thus damaging droughts.

The atmosphere is not the only part of Earth that is heating up. The oceans have increased in temperature over the past century, as well. This has several implications to overall weather patterns around the globe. Perhaps none, however, are as significant as the effects to tropical systems.

Tropical systems thrive on a few basic conditions. One of these conditions is a warm ocean surface temperature. Even when all other conditions remain the same, a rise in overall ocean temperature — at least in areas capable of developing tropical storms — will create an increase in the number of tropical systems and an increase in the potential intensity. Climatology has supported this correlation, as the average number of tropical systems has gradually increased as the Earth's oceans have warmed. The 2005 Atlantic hurricane season witnessed a record 27 named storms. This included three of the most intense hurricanes on record: Katrina, Rita, and Wilma. Climate change suggests that hurricane seasons like 2005 will become more prevalent in the coming years.

Impact of Urban Sprawl

Urbanization and population growth in the U.S. will continue to affect weather patterns and increase the potential for natural catastrophes. Many major U.S. metropolitan areas are impacted by what is known as the "urban heat island effect." This is described as an increase in temperature from rural areas outside of a city to urbanized areas within the city.

Major cities have three specific characteristics that create this increase in temperature:

• Replacing trees and vegetation with pavement, buildings, and infrastructure reduces the cooling effects of evaporation.
• Skyscrapers and narrow streets can trap heat and reduce air flow.
• Heat exhausted from vehicles, factories, and other mechanical devices adds warmth.

A rise in temperature increases the ability of the atmosphere to retain more water. Replacing vegetation with pavement, buildings, and infrastructure significantly reduces the permeability of a metropolitan area. This combination creates a higher likelihood for severe flooding in metropolitan areas, as heavy rains are channeled into smaller surface areas and drainage basins. The end result for insurance companies and government agencies like the National Flood Insurance Program is an increased risk of flood-related claims in urbanized areas as they continue to expand to support population growth in the coming years.

Historically, U.S. coastal areas have been significant population centers mainly because of their proximity to ports for trade and commerce. Additionally, in the modern era, many Americans have moved to coastal areas to enjoy the benefits of the temperate climate. In 2003, approximately 153 million Americans lived along the coastal fringe of the U.S. Although only 17 percent of U.S. land mass is classified as coastal fringe, approximately 53 percent of the country's population lives in this area. In other words, more than half of the total U.S. population lives in less than a quarter of the U.S. land mass. In addition, two of the fastest growing coastal regions in the U.S. are the Southeast and Gulf Coast. Growing coastal population in high-risk areas, combined with increased tropical storm activity is an alarming combination for the insurance industry.

Forensic Meteorology

As climate change continues to evolve and more turbulent weather occurs throughout the country, it will be more important than ever for insurers to verify the accuracy and the exact cause of weather-related claims. With an increase in catastrophic claims expected, the best way for insurance companies to protect their bottom lines is to significantly reduce fraudulent weather-related claims. If property and casualty insurers can eliminate half of all currently fraudulent claims, savings would reach an estimated $15 billion each year. With the number of claims expected to increase in the future, the savings would continue to increase.

Forensic meteorologists have the expertise to verify the weather conditions for an exact location and date. This allows claim adjusters to verify the validity of suspicious or high-figure claims to ensure that the claim is handled accurately. Additionally, when catastrophic weather events occur, there is often more than one weather element responsible for damage. Forensic meteorologists can sift through the data to determine the magnitude of each weather element at the exact location of loss. Claim adjusters can then determine the exact cause of damage to verify that the claim is covered under the active policy. Credible forensic meteorologists always support their findings with certifiable weather records that are admissible in the courts. Expert weather testimony is also employed by such meteorologists to corroborate findings. On occasion, the denial of a claim results in a lawsuit against the insurer. An expert meteorologist protects the insurer and will often discourage parties from filing lawsuits.

Changes on the Horizon

Changes in climate as well as urbanization and population trends are expected to increase the frequency and magnitude of catastrophic events in the future. This will create new stresses and challenges for the property and casualty sector. Not only will the industry likely see an increase in claims, but the door will also open for fraudulent claims to piggy-back onto significant weather events. For the insurance industry to continue to sustain, it will need to find solutions to these challenges. Forensic meteorologists can be a significant part of that solution by providing claim adjusters with an assurance that they are accurately assessing each weather-related claim, thereby limiting the burden of fraudulence. As our weather continues to change, it will be advantageous for insurers to employ the expertise of forensic meteorologists to correctly assess weather events and reduce the costs of fraud.

B. Steven Roberts is president of Veritas Weather, a forensic weather company that provides past weather verification for weather-related insurance claims. He may be reached at 843-564-0058, sroberts@veritasweather.com, www.veritasweather.com.