Severe flooding in the south of England has served to highlight the costs posed to the insurance industry by extreme weather. Global warming presents new, unpredictable challenges. In this age of weather uncertainty, accuracy of forecasting becomes of vital importance. Kathryn McCarthy looks at the progress being made by meteorologists.

As the heartlands of rural England experience extreme weather conditions and extensive flooding, so our national preoccupation with the weather has intensified over the past few months. The ramifications of decades of atmosphere abuse are being seen first hand in the UK, compelling evidence for many that global warming is a reality and that our climate is changing. Since records began in the seventeenth century, we have experienced seven of the hottest years on record in the last decade alone, and the intense rainfall across the UK which started in the Autumn has led to some of the worst floods of recent times.

The cost of weather-related claims to the insurance industry averages £1bn a year while an extreme event such as inland flooding can cost more than this in a single hit. Understandably, it is a priority for the industry to understand the effects of severe weather, where it is likely to hit, and whether accelerators such as global warming will speed up the incidence of severe weather events in the UK.

For many people, the recent floods have helped to confirm their belief that global warming is at the heart of our present climate change. There is convincing scientific evidence that man is accelerating global warming through emissions into the atmosphere, and that even if these emissions were cut to a reasonable level today, global warming would continue for years due to the inertia in the climate system.

A recent report from the CII Society of Fellows (SoF) states that while global weather losses fell between 1992 and 1997 they have recently risen again sharply. The UK market has been fortunate in avoiding major catastrophes since 1990, but the recent flooding has placed weather-related losses back in the spotlight.

The SoF report states that it is not possible to estimate the cost of climate change accurately, because the experience of the insurance industry is that even small changes in the severity of events can generate enormous increases in damage.

One climate change scenario predicts that in 2050 the sea level on southern UK coasts will be over 30 centimetres higher than today, significantly increasing the risk of storm surges. There are further predictions that five out of every six years will be warm compared to historic levels, leading to heat-waves and droughts in the summer, intense periods of rainfall, and stormier winters, all of which will impact on industry and commerce.

Predicting future weather conditions is big business today, and the prospect of being able to forecast up to a year in advance is a much sought-after prize.

Accuracy at a premium
The sheer complexity of weather patterns means that predicting and forecasting are expensive services which still cannot guarantee 100% accuracy. But developments in IT, data collection and our understanding of weather systems are improving the accuracy of forecasts.

The Met Office supplies forecasts and weather data to the insurance industry, helping to validate weather-related losses and to plan claims handling during extremes of weather.

"The accuracy of our weather prediction is improving," comments Don Perry, account manager for the Met Office's commercial division. "There are many variables but there have been some major advances and we can now look further forward with more certainty. Our three day forecasts are now as good as our one day forecasts were a few years ago."

Forecasts are available as far forward as one month, and predict the temperature, rainfall and windspeed. The Met Office also provides a hazard survey, which seeks to anticipate events which may cause property damage. This is provided as a five day forecast based on ten representative sites around the UK.

"We asked insurance companies which weather elements cause most property damage, so the service predicts heavy rain, high wind, freezing temperatures and rapid thaw," comments Perry. "The service looks at whether our sites are likely to suffer these hazards and on what scale. This gives insurance companies the opportunity to prepare themselves for damaging weather."

Most business weather services provide short range forecasts to help insurance companies gear up for extreme weather events. Forecasts are usually limited to a week or two in advance and are revised daily to reflect changes in weather patterns. The demand for accurate weather forecasts from the insurance industry is increasing, as the benefits of advance warning filter through.

"The forecasting side of our business is growing," comments Steve Roberts, managing director of Weathernet, which has a nationwide network of 100 manned and automatic weather stations in and around the UK's major towns and cities. "We issue severe weather warnings by email and fax up to ten days out, forecasting the extent and magnitude of weather events for insurance companies so they can set up a claims contingency. We also provide a continuously updated five day severe weather warning, which can be accessed by phone, via the Internet, or as a local installation."

External weather data is increasingly used by insurance companies to validate small value weather-related claims.

"It is not economic to validate low value claims with an adjuster. We help insurance companies validate the 25% of all claims related to catastrophic weather loss," comments Roberts. "We have handled 400,000 claims in the last four years from a cross section of UK insurers. Over 21% of claims handled are repudiated, and we have made confirmed savings of over £10m for our customers."

Our chaotic atmosphere
Roberts believes that Weathernet's network of weather stations are invaluable because they are situated in and around major towns and cities, whereas other weather stations tend to be on the coasts or at airports.

"Our stations are situated close to the points of damage, and our daily weather data is augmented by access to local press coverage. You can enter a postcode and date, and the database calls up the weather conditions for that day."

The biggest problem with weather prediction is that the atmosphere is essentially chaotic. This means that any alteration to its current pattern will result in radical changed in the course of only a few days or weeks. Short range weather predictions are probability-based, combining the analysis of historic weather data with complex forecasting techniques. However, forecasters are a long way from being able to map out weather patterns for more than a month, let alone a year, in advance.

Forecasting by the sun
Some long range weather forecasters claim to be able to predict future weather by the sun's activity. Advocates of this method say that solar eruptions within the 11-year sunspot cycle lead to strengthened solar winds, which affect our climate. Solar wind cycles are complex, but fairly predictable, making forecasting possible. While the accuracy of solar weather forecasts is not 100%, some useful predictions, notably the last two El Nino events, have caused theorists to look more closely at this area.

Melvyn Wallis, commercial director of Weather Action explains the company's Solar Weather Technique.

"Heat and light come from the sun and are the driving forces of our weather. The Solar Weather Technique looks at the relationship between solar activity and the development of weather systems. Classic meteorology is fluid forecasting, but there are factors which can disrupt that process and change weather patterns, making long range forecasts all but impossible by that method.

"But, by looking forward, we can determine the sun/earth relationship in a year's time. We don't claim 100% accuracy in our forecasts, but we can tell you, better than guesswork could, to time-windows of a few days. We can be quite close on the timing and severity of an event such as a storm.

"Forecasting weather using the sun was once dismissed by many," says Wallis. "Now, however, forecasters around the world are doing it, for example the Danish Met office and NASA."

Weather Action can provide long range weather forecasts to the industry by identifying key weather periods, temperature, sun, rainfall and wind for two to eleven months ahead. Their extra long range service provides a summary forecast up to thirty months ahead, which highlights any predicted extremes.

The insurance industry is facing calls to become more proactive on the strategic issues of insurability, risk management, and climate control. Climate change is delivering a whole new set of challenges for the industry, so that historical weather losses may cease to be a reliable indicator of the future. Predicting the weather accurately and confidently may never be achievable, but the industry must use better information and harness the new contributions to the forecasting debate if it is to contain weather-related losses in an uncertain future.