Climate change in Australia & NZL

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Australia faced with climate change

Anthropogenic climate change, coupled with exposure development, will significantly alter the insurance industry's risk maps of Australia and New Zealand over the coming decades.

While the effects of anthropogenic climate change in Australia and exposure developments are still emerging in some regions of Australia, Oceania and New Zealand, the question arises as to what we – both insurers and society – need to do to be ready for the future. This is a summary of the current situation and future prospects.

Sea level to rise significantly

Not only in Australia climate change is leading to a rise in the mean sea level, which poses a particular threat to those low-lying island nations in Oceania, such as atolls, which have no higher ground as alternative living space. The rise in the mean sea level is directly attributable to two main effects: thermal expansion of the warming water and the melting of onland ice sheets and glaciers.

Anthropogenic warming accelerates this rise. For example, the global mean sea level increased by an average of 1.7 mm a year between 1901 and 2010. However, looking only at the recent years 1993 to 2013, the rate of rise was already 3.2 mm a year. The mean along Australia's coastlines is similarly high at 3.1 mm per year; for New Zealand it is 2.1 mm per year. Much greater increases were reported for the coastlines of islands in Oceania, such as Tuvalu. However, natural climate variability may also be a contributing factor in this case.

If greenhouse gases in the atmosphere continue to increase as they have in past decades – roughly in line with what is known as the RCP8.5 scenario – the global mean sea level can be expected to rise by 63cm, with an uncertainty range of some ±18cm, by the end of the century. Similar results for climate change in Australia have been obtained from modelling projections for the coastlines of Australia and New Zealand.

Climate change in Australia - Did you know?

Dr. Eberhard Faust, Head of Research: Climate Risks and Natural Hazards

This will intensify coastal erosion. Storm surges and waves could cause more damage to coastlines, port facilities and exposed infrastructure as early as in the next few decades. Depending on the topography, it will be necessary in the long term to consider armouring, elevating or abandoning certain structures. Such adaptations are inevitable and will pose major challenges to address climate change in Australia.

Changes in severe thunderstorms

According to a current study, severe thunderstorms are likely to increase, above all in the northern and eastern regions (Allen et al., 2014). For the major cities located here, the study predicts a considerable increase in the frequency of severe thunderstorm days by the end of the century (2079–2099): a 14% increase for Brisbane, 22% for Melbourne and 30% for Sydney. In contrast, moderate declines are likely to occur in the west, for example in the central wheat belt.

Increased supply of moisture along the coastlines, in particular, contributes to the increased frequency of environments characterized by high measures of potential energy needed for thunderstorm development. The moisture comes from the warmer and more strongly evaporating ocean surfaces. This projected development is based on a scenario that involves substantial rises in CO2 emissions in the future (A2, IPCC SRES, 2000), meaning a continuation of the current business-as-usual trend.

More intense tropical cyclones

Tropical cyclones can reach the coastlines of Western Australia, the Northern Territory and Queensland between November and April. The number of storms observed in the period from 1981/82 to 2012/13 shows a declining trend, which is likely to continue. For instance, current climate model projections under the RCP8.5 scenario through the end of the 21st century show a continued decrease in the frequency of tropical cyclones. This applies to both northwestern and northeastern Australia, and to the surrounding ocean.

In the northeast, the total number of storms could decline by 15 to 35%. However, this decrease is only borne by storms of minor and moderate intensity, which control the trend for the total number of storms. Opposite to the decrease in the total, a rising trend is on the cards for the smaller sub-set of very violent storms.

Higher precipitation levels near the eye of a storm
What is more, projections indicate that higher precipitation levels must be expected near the eye of a storm in future. Because of the tremendous loss potential associated with intense tropical cyclones, these changes will most likely increase the insured risk arising from cyclones.

Another important aspect is that according to projections, a higher number of storms are to advance as far south as the 25th parallel and beyond. As a result, the threat to Brisbane (27°S) and the high exposure of the Sunshine Coast and Gold Coast will increase.

Circulation changes and less rainfall in the south of Australia

Observations and climate models show that atmospheric circulation patterns are changing: the tropics are expanding polewards under the effects of continued climate change. This is associated with a poleward expansion and intensification of the subtropical high pressure zone. Climate change influences also the southern half of Australia.

On account of this shift, the west-wind corridor south of the subtropical high pressure belt is also shifting further polewards, and exhibiting an increased westerly prevailing current. In the west-wind corridor, low pressure systems with weather fronts move from west to east and (still) reach southern Australia as well as Tasmania and New Zealand, but at a reduced frequency.

Decrease in precipitation totals

Circulation changes are leading to the decrease in precipitation totals already observed in the past – since the 1970s in the southwest and since the mid-1990s in the southeast of Australia. In the cool season from April to September, the decrease (averaged for the entire south) is in the range of 10 to 20%. In several southwestern regions, precipitation totals for the last 50 years have decreased by as much as 40%.

While events like the Big Dry (1995–2010) in the southeast of Australia are caused in part by natural climate variability, such as the non-occurrence of the negative phases of the Indian Ocean Dipole since the mid-1990s, developments in the south overall cannot be explained without factoring in the changes in the circulation systems described above, which are likely attributable to anthropogenic climate change in Australia. The subtropical high pressure belt extending farther to the south plays a central role. Because of it, weather fronts of the southern west-wind zone that bring rain have less of an influence on the southern regions of Australia during the cool season.

Frequency of cut-off lows and “East Coast Lows“ will decline

According to current climate models, these developments of will continue to progress. The frequency of so-called cut-off lows will probably decline overall as a result. These are rain-laden lows that are cut off from the westerly current in the south, and therefore slowed in their west-east movement.

On the subtropical east coast, these systems are called “East Coast Lows,” and they are responsible in wet years for most of the precipitation in the southeast, particularly for the proportion of extreme precipitation. Even if these systems will, as projected, develop less frequently in future, recent studies show that the frequency of intense East Coast Lows could increase as a result of climate change in Australia.

The projections result in the following general situation: precipitation totals for the cool season will decrease by 20 to 40% in southern Australia, particularly in South West Victoria and west Tasmania, but also – in the event of severe climate change (RCP8.5 scenario) – in eastern Australia. No clear changes in precipitation are projected for the tropical north or the rangelands.

Increasing flooding hazard

The area of Australia exposed to extreme precipitation has expanded by 50% since the 1990s. This entire region sees days with precipitation levels that are among the top 10% based on the daily precipitation distribution. Although mean precipitation totals are decreasing in the eastern and southern regions, climate models project a further increase in heavy precipitation for Australia as a whole.

The expected extent can be illustrated by taking a look at extremely rainy years, which have a recurrence interval of 20 years and can contribute significantly to major flood events. By the end of the century, an approximately 25% increase in the amount of rainfall is expected for these 20-year events in southern and eastern Australia, based on the period from 1986 to 2005 (RCP8.5).

The projected increases for northern Australia and the rangelands are slightly lower, and involve a high degree of uncertainty in some cases. Consequently, the flood risk will continue to rise in the future, not least because very intense East Coast Lows or severe thunderstorms are likely to increase in the east and north.

Extreme drought events on the rise in Australia

The changes in the circulation systems lead to the above-mentioned decrease in mean precipitation in the southern and eastern regions, and to an increase in mean temperature. In the RCP8.5 scenario, the percentage of time spent in drought conditions will therefore increase by up to 20% by the end of the century.

Although the models predict a decrease in both drought frequency (number of drought events per 20-year period) and drought duration for moderate and severe droughts, they simultaneously show a sharp increase in extreme drought events. This shift in intensity will be evident by the 2030s already. Thus the trend observed in recent years will be maintained and even get stronger. This expectation also is in line with projections of more frequent, extremely strong El Niño events involving major drought in the eastern half of Australia, should climate change continue.

Growing bushfire hazards in Australia

The developments described also increase the bushfire hazard. Mainly in southern and eastern Australia, many plants will dry out more quickly and catch fire more easily.

Climate models driven by the RCP8.5 scenario predict an increase of 160 to 190% in severe fire danger days by the end of the century. Also in the eastern regions of New Zealand the fire hazard will continue to rise with continued climate change. By contrast, only slight changes are expected in tropical northern Australia.

IPCC scenarios

What the insurance industry needs to do

The insurance industry needs to accept the non-stationary nature of weather risks and loss distributions due to climate change, and incorporate this in risk modelling.

For example, a gradual increase or intensification in severe thunderstorm and hailstorm events in the urban areas of eastern Australia would make it necessary to estimate the resultant rising proportion of required risk capital over time, and to devise an appropriate response, based either on reinsurance or other strategies to secure sufficient risk capital, and/or on other instruments, such as deductibles or product innovations.

Understand hazard changes in Australia

Mapping non-stationary temporal risk conditions is a particular challenge for risk models and their probabilistic event sets, because such models are based on the procedures of stationary statistics. Reflecting the changed hazard levels, and thus also risk levels, for each location in our pricing and hazard zoning tools will be critical. Doing so will contribute both to raising awareness of the risk and to helping to reduce vulnerability in general.

Building codes must incorporate a buffer for changes in frequency and intensity over the lifetime of buildings or infrastructure; land use regulations must be modified and enforced, particularly on the coast. Here again, the insurance industry can use its knowledge of hazard changes, acting in concert with other branches of the economy and the government sectors' mandate to provide basic public services, to bring such changes into the public perspective and promote social adaptation to them to address the effects of climate change in Australia.

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