The U.S. Climate Change Science Program and the Subcommittee on Global Change Research have released a report that provides analysis of observed and projected changes in weather and climate extremes in North America and U.S. territories.
The report is based on scientific evidence that a warming world will be accompanied by changes in the intensity, duration, frequency, and geographic extent of weather and climate extremes. Specific future projections include:
- Abnormally hot days and nights, along with heat waves, are very likely to become more common. Cold nights are very likely to become less common.
- Sea ice extent is expected to continue to decrease and may even disappear in the Arctic Ocean in summer in coming decades.
- Precipitation, on average, is likely to be less frequent but more intense.
- Droughts are likely to become more frequent and severe in some regions.
- Hurricanes will likely have increased precipitation and wind.
- The strongest cold-season storms in the Atlantic and Pacific are likely to produce stronger winds and higher extreme wave heights.
The full report can be downloaded here.
All this points to an increased need for greater risk protection both for end-users of catastrophe bonds and weather risk products as well as for insurers and reinsurers. Factoring increases in incidence and severity of events into a transaction is also looking increasingly important and further research into how this might be actioned is definitely required. Alternative risk transfer techniques seem the natural choice for designing new financial instruments to combat these risks.