As climate change continues to drive severe weather events, the costs of recovery are going up. Rebuilding and repair, lost time and productivity, and supply chain shortages are just some of the impacts on business after a major climate event. To mitigate these risks, consumers and businesses alike turn to the insurance sector to protect their most valuable assets. However, there is growing evidence that we are approaching a future where insurance policies can’t or won’t cover the damages. A recent report from Ortec Finance finds that increased physical risks are culminating in an insurability crisis, one that we may see unfold over the next few decades:
“Under two of Ortec Finance’s latest higher warming scenarios, nearly 30% of the US population will be living in a state where the median household is unable to afford insurance by 2050, rising to 50% by 2080. Insurers have already started withdrawing cover from high-risk areas such as California and Florida in the US as well as Australia.”
We’ve seen others raise similar concerns in the past, and insurance companies have pulled out of some areas entirely. For businesses, real thought needs to go into any future expansion. Especially for facilities expected to perform for the long term. Reviewing existing floodplains and wildfire risks may not be sufficient. Many risk management tools, like FEMA’s flood maps, are built on 100 years of historical weather patterns. With climate change worsening, areas that were safe 100 years ago may be in danger today, and an insurable asset today may not be insurable 5 to 10 years down the line.
Our members can find more information on climate risk management here.
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