American optimism, insurance and the climate crisis
Changing weather patterns are impacting insurance claims worldwide. Norway is one country that's taking a proactive approach to the climate crisis.
Benjamin Franklin said: “By failing to prepare, you are preparing to fail.”
It is possible that he had climate change in mind?
As the story goes, Ben Franklin was not only a founding father of the United States but also the founder of the country’s oldest property insurance company. His Philadelphia Contributionship for the Insurance of Houses from Loss was organized in 1752 and incorporated in 1768. The company is credited with introducing several principles that now serve as the underpinning of the modern insurance business.
It would be fascinating to see how such a visionary might approach today’s climate crisis.
Recent weather events around the world and in the United States (primarily along the coasts) have put quite a burden on insurance carriers. Increased losses and indemnity dollars ultimately lead to premiums rising as high as the sea levels.
But there is cause for hope: Consider If P&C Insurance in Norway. Together with the CICERO Centre for Climate Research, this carrier recently compiled a survey delving into the ability and preparedness of that country’s cities to cope with future weather events.
In Norway over the last two decades or so, there has been an increasingly high number of insurance claims related to rain and water damage. The data includes 19,543 claims in the 1990s, spiking to 67,009 in the next decade, followed by a staggering 156,298 losses reported since roughly 2010.
The trend spurred many municipalities in Norway to take a hard look at disaster response and mitigation.
Stavanger, the country’s fourth-largest city with just under 131,000 residents, tops the list of the best climate-adapted municipalities in Norway. In a recent survey of weather preparedness, this city in southwest Norway had done the most proactive planning for the future’s wetter climate. These efforts include increased drainage infrastructure as well as administrative action such as tighter restrictions on building permits. The city also includes in its climate change plan the development of future wetlands, which play a crucial role in controlling floods by absorbing water and slowing potential flood impact.
Our warmer future
As the planet continues to warm, the U.S. will face similar trends as Norway. Some scientists predict that by 2050, temperatures in the northern U.S. will become as warm as what we now expect in the Deep South. (One potential upside: ‘Snowbirds’ of the Northeast may not require as many trips to Florida.)
Consider that in Cleveland by 2050, the average highs temperatures in winter and in summer will likely to be five degrees hotter than today, according to a recent Vox.com article written by Umair Irfan and Kavya Sukumar. The authors elaborated by explaining that just a few more inches of rain or degrees in heat can significantly affect the environment, which in turn could translate into new losses and reported claims in the insurance arena.
In the U.S. just as in Norway, preparation will be key for hundreds of cities that will have no choice but to adapt to new extremes in weather. Insureds also will need to change the way they manage their businesses, properties and valuables.
Are we collectively prepared?
Harvard Business Review also recently addressed the changing climate and whether we are “collectively underinvesting in protecting ourselves.” The article posed the question of whether or not the insurance industry can “nudge” the federal government (and all Americans) into better preparing for the future.
It also discussed the fickle nature of the American public, who may be initially shocked by lethal weather events. But those who are not immediately impacted quickly move on to the next news cycle and fail to adequately prepare for the inevitable next catastrophe. This sense of blind optimism could be putting the entire country at a heightened risk.
Chris Casaleggio (ccasaleggio@h2m.com) is a former liability claims adjuster and currently serves as department manager of Forensics/Insurance for H2M architects + engineers.
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