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Insurers face higher catastrophe risk as Earth energy imbalance shifts
Satellite data cited by the article shows Earths energy imbalance has roughly doubled since 2000, with insurers warning model gaps could leave pricing behind warming.
Insurers and reinsurers are focusing on new satellite evidence that the Earth is absorbing extra heat faster than many climate models assume, a development that threatens the catastrophe modeling inputs used for pricing and long term underwriting assumptions worldwide, Insurance Business reports. The article points to NASA satellite measurements from the Clouds and the Earths Radiant Energy System, CERES, which track changes in how much sunlight the planet reflects, known as albedo, and how much outgoing heat radiation the Earth emits. It says NASA scientists confirmed that the difference between reflected sunlight and outgoing heat, the Earth energy imbalance, roughly doubled between the 2000 to 2010 period and the 2013 to 2023 period, with the upward trend continuing since. That observed acceleration matters for underwriting because catastrophe models depend on physical assumptions about the energy budget, and the article says the discrepancy is arriving faster than models can reproduce. It cites ETH Zurich researcher Reto Knutti estimating that extrapolating forward implies near term warming could end up 10.0% to 30.0% higher than current consensus projections, and notes Kyle Armour saying the models appear to be missing some processes. The piece adds that for an industry relying on multi decade model outputs, a persistent and growing gap between observed data and model results increases basis risk, which can undermine how actuaries translate climate science into catastrophe pricing. It also quotes Max Planck Institute meteorology leader Bjorn Stevens describing the shift in how scientists read two decades of satellite and ocean float data as a game changer, and references prior warnings from WTW researchers that insurers global climate scenarios may already be inadequate.
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