To drive sustainability in a changing climate, focus on preparedness
ArticleNovember 10, 2022
By Joffre Mishall, Head of Large Property, U.S. National Accounts, Zurich North America
On September 28, 2022, Category 4 Hurricane Ian made landfall in Lee County on the west coast of Florida, devastating Fort Myers Beach, Sanibel Island and other seaside communities with storm surges topping 15 feet in some areas and windspeeds in excess of 150 mph.1 Those windspeeds tied Ian as the fifth-strongest hurricane on record to ever strike the United States.2
We’ve seen the images of the devastation, from communities leveled to the deeply personal impacts on residents of the affected areas. The total financial impacts of Hurricane Ian are still being tabulated. However, according to RMS, a leading provider of climate and natural disaster risk modeling, total private-market insured losses from Hurricane Ian could come in somewhere between $53 billion and $74 billion. RMS also estimated that the National Flood Insurance Program could see an additional $10 billion in losses from storm surge and inland flooding caused by the storm.3
Meteorologists have long understood that hurricanes and typhoons gain strength by drawing heat energy stored in the upper layers of the ocean. The longer a storm builds over an expanse of warm, open water, the stronger it will be at landfall. This raises the inevitable question; how much is climate change impacting the strength and frequency of hurricanes as well as other natural hazard events?
Welcome to the “new normal”
One recent study reports that the upper reaches of Earth’s oceans — roughly the top 2,000 meters — have been warming planetwide since at least the 1950s, with the most significant changes recorded in the Atlantic and Southern oceans.4 The findings illustrate the role that the oceans play in absorbing more than 90 percent of the excess heat trapped in the atmosphere. This warming — which scientists behind the study say will continue at least through 2100 — will create new hot spots around the globe.5
So, have we entered a period during which businesses, governments and communities must invest more heavily in preparedness and mitigation against the impacts of climate change-driven severe weather? One of the most authoritative sources of climate data, the National Oceanic and Atmospheric Administration (NOAA), says yes.
Every 10 years, the NOAA performs exhaustive analyses of U.S. weather data from the prior three decades. The data is used to calculate average values for temperature, rainfall and other weather events, looking at what the NOAA historically has designated as “U.S. Climate Normals.” Based on trends identified by the agency over time, U.S. Climate Normals have shifted significantly. According to NOAA, we are now living out a scenario the agency’s climatologists are officially calling a “new normal” of warmer and wetter conditions for the foreseeable future.6
Change is in the wind
The implications are clear. As the atmosphere retains more heat, its ability to evaporate and retain more water vapor will drive the warmer, wetter climate predicted by NOAA’s new normal projection. This will continue to result in more frequent and severe weather events, including stronger, more destructive hurricanes. It will also manifest in more frequent and powerful convective storms inland. These will generate stronger hailstorms, powerful straight-line winds and very likely more tornadoes, including twisters in regions where they have been rare or virtually unheard of in years past, such as New England. We will also likely see heavier precipitation events causing more frequent, “100-year” pluvial or flash flooding, including in areas not prone to such events in the past.
On the other side of the precipitation curve, drought-prone areas will experience longer and more severe droughts, resulting in continued devastating wildfires. However, some areas prone to long-term droughts can experience severe flash flooding when the rains finally come, as parched, hardened ground is unable to absorb the runoff. Such “weather whiplash” events may become more common in the years ahead. Last summer, Dallas and the surrounding area experienced a period of dozens of 100-degree days as well as 67 straight days without rainfall. Then came an almost biblical deluge that pummeled Dallas County with more than a foot of rain during a 12-hour stretch. Neighborhoods and roadways were submerged, with autos swept away and hundreds of people requiring rescue. By one estimate, this weather whiplash cost up to $6 billion in damages and lost economic output.7
Additionally, growing expanses of concrete in areas experiencing significant, ongoing development are complicating matters, making water runoff more difficult as the reconfiguration of topography accelerates. This is dramatically changing the picture regarding the traditional factors governing the mapping of flood zones by the Federal Emergency Management Agency (FEMA). Our own data indicates that 60% of Zurich’s flood losses are now in low-frequency flood zones and areas where such severe, pluvial flooding has been infrequent or virtually unknown in the past.
A “new normal” for property insurance?
Given the certainty that climate change will influence a more volatile and unpredictable outlook for natural catastrophes in the decades ahead, what will the property insurance marketplace look like as it responds to our new normal? Our view is that property underwriters will be taking a much broader and more conservative perspective of natural hazard risks. Risk models used by property insurers will have to be more frequently updated and revised. Reinsurance capacity is likely to become more expensive and difficult to obtain for a variety of climate-challenged property risks. All of which will result in customers trending toward higher retentions and increased captive participation.
In addition, we will likely see more layering of property insurance covers on larger risks, with perhaps 10 or more carriers participating on a program that might have two or three participants today. In such a scenario, the claims process after a major natural catastrophe could become more complicated and time-consuming with multiple carriers participating on the same risk. We may ultimately see a time when risk managers will purchase two property policies for the same facility — one for conventional fire insurance and other perils, and another, entirely separate contract written exclusively for natural catastrophes. Ultimately, property in some geographies might find certain hazards have become essentially uninsurable at any price.
Focus on preparedness
If new construction is currently not included within a FEMA-designated flood zone, will that be true in 10 or 15 years? In tandem with changing weather patterns, will grading or other topographical changes required for your site or neighboring projects enhance vulnerability to pluvial flooding? What accommodations need to be made to ensure vital physical plant equipment will be safe from water damage should a flood or storm surge occur? Actions such as positioning critical equipment on an upper floor at a more flood-secure elevation can be important steps.
We need to consider the lessons of the past as we look to the future. During 2012’s Superstorm Sandy, many New York businesses learned that having physical plant equipment in basements was a costly mistake. Basements are where flood waters will go first, which is why placing physical plant equipment at higher elevations may be a key component of preparing new construction or in retrofits of existing structures as we anticipate more severe weather events.
In areas prone to wildfires, prudent management and husbandry of vegetation and landscaping in proximity to a commercial structure can reduce the potential for fire loss, especially when drought conditions have turned brush and ground cover into dangerous tinder.
One of the consequences of a severe weather event may be an interruption of production and business continuity. When possible, businesses with multiple locations should consider the advisability of distributing critical operations, production equipment and inventories across different facilities and geographies. The intent is to maintain some degree of business continuity should one location be put out of action by a severe weather event.
Of growing importance in a climate “new normal” is companies having well-planned, documented and practiced emergency preparedness plans to anticipate, and potentially mitigate, the impacts of worst-case natural hazard scenarios. Additionally, for new construction or reconstruction following a serious natural hazard loss, the focus should be on building back better to enhance preparedness. Companies are encouraged to consider the adoption of principles such as the IBHS FORTIFIED CommercialTM standard, which clearly lays out recommendations that will help minimize building damages sustained by windstorm. This includes hardening the building envelope (roof, windows/glazing and exterior walls, including openings) to resist the impacts of wind.
In addition to hardening buildings against natural hazards, companies focused on enhancing sustainability should consider the benefits of building back better in alignment with LEED certification and other green initiatives. Doing so will not only help reduce energy and operating costs, but also help organizations contribute to global industry initiatives to reduce carbon emissions.
Helping communities build resilience
Understanding to what degree a changing climate will ultimately impact our personal and professional lives remains an open question, even as businesses, governments and the global science community continue to collaborate with a focus on mitigating the most severe effects. Clearly, adapting to a new normal and putting a broader focus on preparedness and mitigation will become more important parts of strategic planning for businesses in all industry segments in the years ahead.
From helping to reestablish part of the Atlantic Forest to providing insurance products for innovative, sustainable construction techniques such as mass timber, Zurich is committed to being a part of the solution. Our core mission, as we see it, is to help our customers prepare for whatever the future may hold, building resilience and sustainability for the workers and communities who depend on them.
For more information about what Zurich is doing to help customers and communities prepare for an uncertain climate future, we invite you to learn more about Zurich Climate Resilience Services. In addition, you will find a wealth of information about ways to enhance preparedness and sustainability at the following Zurich information resources:
Joffre Mishall is Head of Large Property, U.S. National Accounts, for Zurich North America. Before taking on his current role, he served as Zurich’s Midwest Regional Property Leader, Property Portfolio Manager, Property Domestic Portfolio Manager and Property Claims Large Loss General Adjuster Manager.
References
1. “Ian Storm Surge Topped 15 Feet in Some Areas.” The Weather Channel. 14 October 2022.
2. Livingston, Ian. “What made Hurricane Ian so intense: By the numbers.” The Washington Post. 4 October 2022.
3. Smith, Ryan. “Hurricane Ian losses could hit $74 billion – RMS.” Insurance Business America. 10 October 2022.
4. Cheng, Lijing, et al. “Past and future ocean warming.” Nature Reviews Earth & Environment, Vol. 3: 776-794. 18 October 2022.
5. Dennis, Brady. “Oceans are warming faster than ever. Here’s what could come next.” The Washington Post. 19 October 2022.
6. “The new U.S. Climate Normals are here. What do they tell us about climate change?” National Oceanic & Atmospheric Administration (NOAA). 4 May 2021.
7. “The new normal of weather whiplash.” The Week. 23 September 2022.