We know the impact from climate change is a huge risk that insurers are facing. And what also seems clear is that awareness can be considerably less expensive than paying for losses.
The American Association for Advancement of Science predicts that "sea level rise over the next century could vary considerably, with high-end scenarios yielding a rise of up to 6 to 7 feet by 2100." If these trends are true, Zillow estimates 36 coastal cities would be wiped off the map, and 300 cities would lose homes in them. All told, that means a total value of USD 800bn in homes at risk!
But do we think people impacted by this risk have priced it into their home insurance? Or have they even considered the risk? Doubtful.
If this sounds dire, it's important to note that steps can be taken to mitigate the effects of an almost certainly warmer planet over the next several decades.
Some US coastal and low-lying prone areas have begun plans to minimize the effects of rising sea levels. In New York, for instance, following Sandy, the city has reinforced bulkheads and sand dunes as natural barriers. It is also looking at erecting storm walls and levees. Other areas are focusing on community awareness and education to create resilience against the risk. Some areas have stopped development in prone areas. It's encouraging to see this from an insurance perspective.
Do commercial vending models properly anticipate rising sea levels? At this point I would say no. But there are many improvements and developments, which are being implemented into sophisticated loss models as data is added to models from newer events. Hopefully, the industry is taking a more granular view of the risk, adding their knowledge and experience about climate variability, so we can anticipate this risk accurately.
We know the problems private insurers have had coming up with estimated losses for flood coverage. This work is difficult. But this work is also critical.
Category: Climate/natural disasters: Climate change, Resilience
Location: United States