Winters of Discontent

Goretti triggered a classic battle between warm air and cold. The chill had hung over Europe for several days when it was hit by a powerful blast of warm, moist Atlantic air sweeping north and east as a mature cyclone. The mixed result was extensive snow in the UK’s Midlands, extreme gusts in Cornwall and on the English Channel, downed powerlines in France, and halted trains in Germany. Britons complained of a brief spell of “proper winter” following a Christmas that had been unseasonably mild.

Goretti also gave us a good glimpse of several current, subtly changing characteristics of European winter storms. It opens a window to the atmosphere’s reaction to our changing climate. Alongside similar European windstorms like 2015’s Darragh, Goretti may cause insurers to rethink their reinsurance programs and structures. Unfortunately the entire impact of the warmer world on European extratropical cyclones is uncertain, but our understanding improves almost every day.

We know, so far, that warming is modifying the intensity and sometimes the frequency or simply the timing of European winter storms. Work by the Willis Research Network with the University of Exeter has found, for example, that climate change will not necessarily drive a dramatic increase in the number of winter windstorms that occur in the UK and northwest Europe, but it could drive an increase in the damage they cause.

Storms are projected, in some scenarios, to affect larger areas with stronger gusts. They may drive higher aggregate losses, and therefore generate greater tail risk. Natural variability will of course remain important, with quiet and active periods, but the trend is towards stormier.

Of course, winter storms threaten more than just gusts. Extreme precipitation is another important and damaging attribute of these multiperil events, and that too is changing. The science, including work by the Willis Research Network with the University of Newcastle, demonstrates that climate change is driving a clear upward trend in the amount of winter rainfall in the UK.

Barring any dramatic changes in atmospheric trends, that uptick will continue. We can expect the UK climate broadly, as well as the average winter season, to become wetter. Plan for more frequent, more intense winter precipitation. Alas, the link between rainfall and individual winter storms is more difficult to define. We do know that warmer skies hold more moisture, and that what goes up must come down, but the correlation between extremes of wind and rain is not so clear cut.

The lens of Goretti reveals another climate-change winter-storm impact, one which many insurers should consider when they structure their catastrophe reinsurance protections and retentions. We can expect more wind and rain, but they may not colocate.

Faster‑moving storms can shorten local rainfall duration, but alas that does not necessarily reduce flood risk. The more ground they cover in a shorter time the less rain they can dump in a single place, but total precipitation over larger areas could be higher. That could reduce flood risk, but it could also make it worse (making flood is a complex subject best left for another day).

A third important characteristic of European winter storminess which may be exacerbated by climate change is that more intense storms tend to cluster. Europe has not experienced a serious cluster of winter windstorms since fatal storms Dudley, Eunice and Franklin occurred within a week in 2022. However, the phenomenon remains a concern, and is particularly relevant to event clauses and reinstatements. With contractual structures in mind, an increase in seasonal storm clusters could have an outsized impact. It would highlight the potentially important mismatch between the reinsurance sector, which bisects the storm season each 1 January, and nature, which does not.

Extreme storms have occurred throughout the natural season, which extends from October to March. That makes it entirely plausible that a storm cluster could begin in late December and extend into January, constituting a single event for the purposes of hours clauses. Reinsurance programs which take greater account of winter storm clusters should also consider the wisdom of calendar-year renewals. The seasonality of large natural catastrophe losses are suited very much better to the cadence of North American catastrophe reinsurance renewals, which tend to occur in spring.

Meanwhile, we are sometimes seeing the characteristics of a storm vary significantly across regions. As the atmosphere changes, the extremes within the same storm event may move more towards windy but dry in one place, and wet but not exceptionally windy in another, as the storm tracks. Climate change may be influencing how and where these hazards colocate, even if the impacts themselves are felt locally.

The shift could lead to more hyper-localised extreme weather events. Goretti caused winds gusting in excess of 100 mph in the Isles of Scilly, which remained relatively dry. However, calm Birmingham airport had to close down due to snow, and some high ground in the West Midlands saw accumulations of up to 25 cm. Elsewhere winds were minor, and grounds were powder dry.

The increasingly split personality of European winter storms may be mirrored by storm clusters. Back-to-back events under the same hours clause could alternate between windy and rainy, to deliver multiperil damage to the same layer of coverage.

Goretti may be a sign of storms to come. The way they are reflected in tail risk assessments and models, let alone in the attachment points, reinstatement provisions and pricing of reinsurance towers, is an active area of difference between various views of risk. Understanding which events constitute the rule and which are its exceptions will continue to shape those perceptions.

Goretti knocked out power to about 380,000 households in France, another country regularly stricken by winter storms. Like for Britain, such events reach continental Europe after swinging north through the Atlantic. Portugal and Spain are also regularly visited by Atlantic-born winter storms, and are subject to uncertain change to their frequency and intensity driven by the warming atmosphere. A concentration of impact is possible, and maybe a reduction of impacts on the Iberian Peninsula.

In addition to extratropical cyclones, Mediterranean cyclones (sometimes called “medicanes”) threaten the area, as they do lands to the east and south. Events like 2023’s Storm Daniel, and Storm Alice which brought floods and travel chaos to Barcelona in October, may carry a great deal of moisture and deliver intense cyclonic winds. Their patterns are also changing, and have the potential to bring further discontent to cedants who have not sufficiently considered their subtle shifts.

With natural catastrophe reinsurance protection now affordably available, and parametric covers widely offered to plug gaps lower down programs, it is never too late to have a second look at the income protection your reinsurance tower provides against subtle pattern shifts in the nature of European winter storms.