The Case for Investing in Resiliency

By Francis Hyatt

SEPTEMBER 2021 -- Sixteen years after Katrina, Hurricane Ida rapidly intensified into a Category 4 storm, battering the Gulf up through the East Coast and providing a stark reminder of the immeasurable harm extreme weather brings. Communities across the U.S. have increasingly been impacted by a range of natural disasters, and the recent Intergovernmental Panel on Climate Change (IPCC) report directly linked an increase in extreme weather events to climate change. 

The insurance industry has a unique, front-row seat to the impacts of climate change, as these events increasingly affect policyholders. While we support our customers after a disaster strikes, we also maintain world-class capabilities to synthesize available climate data and make recommendations to reduce risk beforehand. Through this work we know that while there may be uncertainty regarding whether we’ll get more or fewer hurricanes, we know the ones we do get will tend to be stronger and may intensify more quickly – as happened with Ida.

While emissions reduction efforts are critical, now is also the time to wage an equally important fight against climate change that will dictate how we experience climate risk for decades: climate mitigation spending to build more resilient communities. This will require the cooperation of many different players: governments, business, innovators, communities and more. 

Resiliency Protects Communities 

At a local level, today’s efforts will greatly determine the investments communities are able to make in the future. Resilient communities protect their property tax bases, which in turn secure the availability of funds needed to make infrastructure improvements for tomorrow.  

Communities can update their building codes so new projects or retrofits can better withstand inevitable climate change risks. More resilient building codes boost the functional recovery of communities and may also help ensure the safety of people caught in the path of a rapidly intensifying storm with no time to evacuate.

According to the National Institute of Building Sciences, adopting the latest building code requirements can save $11 per $1 invested, while greatly improving society’s resilience and adding only about 1% to construction costs. And above-code design could save an additional $4 per $1 spent. 

An example of this work in action is our partnership with industry peers through the Insurance Institute for Business and Home Safety (IBHS), which drives building safety research and delivers solutions to home and business owners to create more resilient communities. IBHS’ FORTIFIED roofs are designed to keep out wind and rain, preventing common damage from various types of storms. In 2020, 16,000 homes in Alabama built with FORTIFIED roofs withstood the impact of Category 2 Hurricane Sally. Media reports following the event provided dramatic evidence of how FORTIFIED roofs fared versus those that did not meet the standard.

This Is a Group Effort 

The insurance industry has an important advisory role to play for our customers, but we cannot implement climate resiliency alone.  

That is why we support the recent bi-partisan infrastructure bill passed by Congress, which includes funding for various resiliency projects such as hardening the electric grid, transportation infrastructure resilience and creating a new R&D center to study and prevent damage to infrastructure from climate events.

The insurance industry, through our work with the BuildStrong Coalition, was instrumental in advocating for the formation of the Federal Emergency Management Agency’s (FEMA) Building Resilient Infrastructure and Communities (BRIC) grant program in 2019. We were pleased to see that the Biden Administration’s recently announced $1 billion in funding for the 2022 program, which provides help to communities undertaking resilient infrastructure projects. The application period opens September 30, 2021 and closes January 28, 2022. We call upon state, regional and local leaders to take advantage of this historic level of available funds to support their resiliency efforts and better protect their citizens and communities.

Climate Resilience Needs to Begin Now 

Our society is already behind the curve in responding to climate change, so solutions need an “all hands on deck” approach. To mitigate the risks we will face in the future, we need to pair a reduction in emissions to reduce the severity of future climate change with a greater emphasis on building resilient communities. We are on the right path, but the public and private sectors need to come together to take stronger action, including, for example, providing tax or other incentives for homeowners and businesses to rebuild resiliently. And, just as Congress is looking to incentivize the greening of the electric grid, lawmakers should also incentivize its resilience to extreme weather events.  

We either pay for it now or the cost of addressing it later will be unfathomable – both in price and impact on communities and lives. When the communities of 2050 look back to 2021, let’s hope they say we also chose resilience. 

Francis Hyatt is the Chief Sustainability Officer at Liberty Mutual Insurance. At Liberty Mutual, we are committed to supporting climate resiliency and a low-carbon economy through our risk management, underwriting, and investment practices. Learn more here about our sustainability approach.