RISK

Insurers, after White House meeting, emerged worried about more 'extreme weather' events

Five insurance trade groups are promoting stronger building decisions to help counter a sharp rise in losses from extreme weather, prompted by a meeting on climate change between senior White House officials and industry leaders in June.

The groups, whose memberships represent a large share of U.S. insurance companies, released a position statement yesterday that expresses their concern about climbing damage from weather events like hurricanes, floods, downpours and wildfires.

It does not mention climate change explicitly, making some observers bristle, but instead emphasizes an ambitious transition toward damage prevention by improving land-use policies, strengthening building codes and funding stronger construction methods. The statement's subtext takes aim at federal policies that the insurance industry has long said contribute to poor development decisions that increase losses.

"What we're talking about are extreme weather, adaptation, resilience, mitigation, climate-related issues -- whatever you'd like to call it," said Julie Rochman, president and CEO of the Insurance Institute for Business & Home Safety. "The administration calls it climate change. I think, from our perspective, it's really about weather events."

The statement stems from a meeting in June between executives of some of the nation's largest property insurers and senior administration officials, including Treasury Secretary Jack Lew, presidential adviser John Podesta and the administrators of the National Oceanic and Atmospheric Administration and Federal Emergency Management Agency. President Obama pushed for the meeting in June 2013 by highlighting a new partnership with insurers in his Climate Action Plan.

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In the last three months, the two sides have been establishing three "work streams" to develop strategies for improving building codes and land-use decisions, sharing government weather data with insurers and to increase the public's awareness about the risks of living in dangerous areas, like floodplains.

"People think, 'Oh, I had a one-in-100-year event. I have 99 years until I see it again.' That's not right," Rochman said. "Clearly, we're not getting across to people how vulnerable they may or may not be. And that is at the base of everything."

An industrywide aversion to the C-word

Other industry officials involved with the work streams say this is the first administration that seems willing to address government shortcomings in disaster policies. The partnership could lead to some knotty issues, like acknowledging that federal disaster aid could discourage states and cities from adopting sterner guidelines that might limit some development along shorelines.

To help curb those moral hazards, the industry hopes the administration will support the "Safe Building Code Incentive Act." Introduced by Rep. Mario Díaz-Balart (R-Fla.), the bill would boost the amount of disaster aid going to a state by 4 percent if local officials adopted stronger building codes. The measure has attracted bipartisan support.

"It'd be great if the White House put its oars in the water and pushed for that legislation," said Robert Detlefsen, a vice president with the National Association of Mutual Insurance Companies, one of the groups to issue yesterday's statement.

David Kodama, senior director of research and policy analysis at the Property Casualty Insurers Association of America, is participating in a work stream with the White House Council on Environmental Quality to identify ways that the government can share information to help insurers and homeowners better understand their risks.

When the floodplain changes, it can capture homes that were previously in a lower hazard zone, he said. Changes in precipitation can also make stormwater infrastructure more vulnerable.

"It's only after the fact we realize the floodplain has changed," Kodama said. "If the government knows that, then that information should be shared with all stakeholder groups, not only insurance companies who have to pay for those losses ... but the homeowners themselves."

Even as the new partnership begins to tackle long-ignored shortcomings in federal disaster policy, some observers see troubling signs of industry resistance to climate change.

Perceptions vary widely among insurers worldwide about the impact that rising temperatures might have on their exposure to loss and investments. But it's clear by the statement released yesterday that U.S. companies prefer to remain cautious when skirting the turbulent political debate, said Cynthia McHale, director of the insurance program at Ceres.

"I think it's good that the industry is engaging," she said. "But there's a sort of obvious ongoing aversion to talking about climate change on the part of the industry."

Twitter: @evanlehmann | Email: elehmann@eenews.net

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