Natural catastrophes are increasing in severity and frequency, resulting in greater losses.
Disaster losses along the eastern United States coast are projected to escalate in the coming years, in part because of spikes in building and property development.
U.S. Census Bureau data show that the population in coastal counties containing 14 of the country's 20 largest metropolitan areas grew by 84% between 1960 and 2008. (By comparison, population in noncoastal counties grew by 64% during the same period). Indeed, the nine highest population density states are located along the East Coast and the five states experiencing the greatest rise in population — California, Texas, Florida, Georgia and Virginia — are all coastal.
According to AIR Worldwide, the insured value of property in coastal states has historically doubled every decade. Moreover, according to a report commissioned by the Federal Emergency Management Agency (FEMA), U.S. sea level rise and severe weather events are likely to increase coastal area flooding risk by 55% this century.
With the beginning of the Atlantic Hurricane Season upon us, debate over root causes of this increase in the number and severity natural catastrophes will get a lot of headlines. However, consideration of this sort is largely counterproductive in that it complicates potential responses that can save lives and prevent losses. The key to making a positive and lasting impact is to build and grow a Resilience Movement.
|Mastering the shift from debates to dialogues
To make this happen, we need to shift the dialogue from causes to solutions. Insurance is the best candidate to lead in this effort to change the conversation — and here's why we should seize our opportunity to take up the standard.
People look at insurance as something that “happens” after the fact, but helping people rebuild after catastrophe strikes is the most visible part. Like the bulk of an iceberg that sits beneath the water, much of what insurers do, the crux of insurance's impact on the economy, is in the way it helps businesses, communities, and individuals prepare and plan long before a catastrophe. This kind of preparation helps in many ways by:
- Lowering insurance costs,
- Reducing losses, and
- Assisting with faster recovery and rebuilding of our cities and infrastructure.
Insurance's commitment to resilience spreads far beyond advanced risk modeling/reporting and astute management of capital. Insurers and industry groups help to effectuate sound policymaking by advocating for the support of forward-looking legislation (for example, the reauthorization and reform of the National Flood Insurance Program (NFIP), potentially a huge catalyst for a burgeoning resilience movement).
Effective urban planning and building design could play an important role in facilitating the development of a greater capacity for future resilience. That's why the insurance/reinsurance industry supports groups such as the Insurance Institute for Business & Home Safety (IBHS), whose mission is to conduct objective, scientific research to identify and promote the most effective ways to strengthen homes, businesses and communities against natural disasters and other causes of loss.
The industry also collaborates with institutions such as the Atlantic Council's Adrienne Arsht Center for Resilience and the Risk Management and Decision Processes Center at the Wharton School. And this commitment carries on down to the individual level: Homeowners and businessowners who are investing in resilience in their communities. Without risk-sensitive development, population growth and rapid urbanization will lead to increased exposure and risk.
|Setting the agenda
As Peter Engelke, senior fellow with the Atlantic Council notes, “Resilience is a roadmap to meet disruption, minimize damage, restore stability, and come back stronger.” Human civilization always has built near the water — it's how cultures spread and goods flowed. But reality now is the same as it's ever been: We must respect the forces of nature.
Communities that understand the risks they face and mitigate risks are far more resilient to disasters than those who don't plan ahead. And insurance can help to inform discussions that set this agenda. Natural catastrophes are an ever-present threat. The responsibilities of safeguarding property and people are serious matters that demand effective responses all around: Enlightened public policy, motivated partners in the public and private sectors, and well-informed and aware citizens.
Debating endlessly about natural catastrophe cycles is counterproductive. Positive change will come when the politics take a backseat and we can focus all our energies on creating and implementing solutions.
Sean Kevelighan is CEO of the Insurance Information Institute. Follow Sean on Twitter @III_SeanK; [email protected]. Opinions expressed are the author's own.
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