Climate change is a critical conversation for the financial services sector, and in particular, the insurance industry. The science tells us the future holds more intense weather patterns and systems. To mitigate the growing risks we’ll face, we need to pair a focus on reduction in emissions with a greater emphasis on building resilient communities.
After all, in the insurance industry, we have a unique, front-row seat to extreme weather situations. We see the threats they pose to people and the devastation they leave behind. We see the impact they have on the lives and livelihood of families and entire communities. Families upended from their homes because of contaminated floodwaters or roofs damaged beyond repair. Towns that face tremendous difficulty rebuilding when their local supply chains experience disruption. And, unfortunately, the immeasurable pain, suffering and loss of life.
This has a profound effect on our customers, for whom we’ve promised to be there when they need us most. And when extreme weather causes damage to their cars, homes and businesses, we make good on that promise to give them peace of mind.
Those of us in the insurance business take our jobs seriously. We work hard to provide accessible and affordable products, which are foundational to a sustainable economy. And when called to action, we know we provide a sense of security and the hope of recovery. We also feel a very real sense of responsibility to help our customers, and the communities we live in and serve, to prepare for the ongoing impacts of climate change.
We want our customers and communities to be better prepared and to recover more quickly from extreme weather events. However, it’s very clear that we cannot walk down this path alone. Building resilience is a shared responsibility that benefits from coordinated action for the good of our customers, our communities and society overall.
And this is why we are advocating for the common goals we share across the public-private sector, including the prioritization of resiliency efforts that help people weather the storms and reduce the economic impacts of catastrophic events. Now is the time to invest in climate mitigation and build more resilient communities. The decisions that federal, state and local governments make to prioritize resilience will have repercussions for decades to come. Acting now supports our most vulnerable communities and protects their long-term economic viability.
Some actions are clear: Communities can update building codes, so structures are more resilient against catastrophic weather events. This is a great investment, with the National Institute of Building Sciences noting that adopting the latest building code requirements can save $11 for each dollar invested and would add only about 1 percent to construction costs.
During a recent half-day virtual workshop hosted by NOAA and Liberty Mutual Insurance, subject matter experts from the government, financial services industry and academia discussed the policy landscape and explored the challenges with respect to climate data and the community impacts of climate change.
The workshop highlighted how we can gain a better understanding of the impact of climate change through the continued investment in expertise, data and technology. The discussion panels highlighted three areas where climate resiliency needs more public-private partnership:
- Advancing climate data and modeling. The current technology capabilities present limitations for the financial services industry, and the insurance sector, in particular. A more granular understanding of the impact of climate risk helps us to better support our customers and communities to take mitigation actions.
- A better understanding of emerging climate hazards. These perspectives can help us in our role as trusted advisors to our customers and help focus our product innovation efforts to fill protection gaps that may emerge in the future.
- Continuing to educate communities on the importance of climate resiliency. There are already public-private efforts in place around infrastructure investments, but more communities need to understand how thoughtful building can help ensure resilience and reduce the financial vulnerabilities they face due to climate change.
By expanding the climate science perspectives on our teams, improving the breadth and accuracy of our data, and better leveraging tools like aerial imagery and machine learning, we can form an even deeper understanding of the risks we face. There’s a lot of potential for what we can achieve by working together as an industry through public-private partnerships, because climate change warrants an “all hands on deck” approach.
This article was based on Jim MacPhee’s opening remarks during the Climate & Resilience Risk Workshop co-hosted by Liberty Mutual Insurance and NOAA on Oct. 5, 2021. To learn more about the discussions or watch panel videos from the half-day virtual workshop focused on the public-private partnership toward climate resilience, visit here.