Quick Tips for Cities – Climate Adaptation and Insurance Companies

Insurance companies are becoming more and more sophisticated in their ability to assess risk related to climate change  aKatrinaNewOrleansFlooded_edit2nd in turn develop the appropriate products, strategies and instruments toitigate climate risk.  They have been and are increasing their use of catastrophe models, improved long-term weather forecasts and scenario analysis to better understand their risk and their long-term ability to insure certain assets. They have also begun to focus more on loss prevention and promoting risk reducing behavior.

Insurance companies have also been moving toward providing greater support to the public sector in reducing loss and improving risk mitigation. A significant step occurred in 2012 with the UNEP Financing Initiatives Principals for Sustainable Insurance (PSI). This framework was put in place to deal with environmental, social and economic risks and opportunities. Further action was taken in 2015 at the UN World Conference on Disaster Risk Reduction  in Sendai, Japan. Here we see insurance companies sign a global framework, titled the Sendai Framework for Disaster Risk Reduction, to help public governments prepare for disaster risk and improve community resilience. There are five key components of this program and they include.

  • Strong public-private partnerships drive disaster risk reduction and resilience at the local and national levels.
  • Resilience in the built environment is driven by the public sector setting adequate minimum standards, and the private sector voluntarily working towards optimal resilience.
  • All financial investment and accounting decisions, public and private, are risk-sensitive.
  • A resilience-sensitive public and resilience-sensitive businesses drive each other towards resilient societies.
  • The identification, disclosure and proactive management of risks carried by companies and public sector entities is standard practice.

If cities have not already, they may want to start the conversation with their insurance providers to see how they can leverage and deploy their climate risk knowledge as they plan to build out new infrastructure and renovate old infrastructure. It is in both the City’s and the insurer’s interest that more focus be placed on risk mitigation and prevention, rather than focusing solely on loss recovery.

Better designed infrastructure, that is developed for impending climate shifts will significantly reduce loss and limit the time and resources required for community, economic and environmental recovery.

Once a City has been able to quantify and better understand the hazard, property inventory, vulnerability and potential loss, it should begin to also look into what can be done to pay for the infrastructure to mitigate this loss. I discussed ways to pay for this infrastructure in an earlier post.


Published by

Gavin Dillingham

Program Director for Clean Energy Policy at HARC a sustainability research institute in The Woodlands, TX. Work on climate adaptation and investment strategies for resilient infrastructure.

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