Insurance industry partners with climate researchers

The Reinsurance Association of America and the National Oceanic and Atmospheric Administration signed a memorandum of understanding Monday, the latest example of an insurance sector organization working more closely with climate researchers to understand and mitigate natural catastrophe losses.

The agreement between the RAA and NOAA to expand their research and product development relationship follows the May formation of the Tropical Cyclone Consortium by Gallagher Re, the reinsurance brokerage of Arthur J Gallagher & Co, with inaugural partner Colorado State University, a leading hurricane research center.

The RAA-NOAA agreement is to advance “the continued goal of reducing the loss of lives and property damage caused by extreme weather events,” said RAA President Lee Covington, who took the helm of the organization last year. 

“The RAA looks forward to serving as a facilitator for insurance industry and industry stakeholder engagement with NOAA on these important issues,” he said.

The relationship will focus on disaster preparedness, better response to natural disasters, improved risk assessments and provision of information to policyholders, risk reduction — including reviews of building codes — and advocating for public policy measures to improve resilience.

The London-based Gallagher Research Center, of which the Consortium is a part, is a growing team, according to Steve Bowen, Chicago-based chief science officer at Gallagher Re. In addition to the consortium, Gallagher participates in severe convective storm research at the University of Oklahoma and climate litigation research in London, he said.

The consortium, which expects to announce new members in the coming months, will examine population trends and other factors, in addition to the physics of storms and potential drivers of intensification, Mr. Bowen said.

In addition to rising temperatures leading to intense storm events, “we’re also seeing a continuation of more people moving to coastal locations and the implications of inflation and higher construction costs and labor costs,” Mr. Bowen said. “There’s a lot of these different features in play, beyond just the hazard component, that really is driving the overall risk profile higher in many coastal parts of the country.”

The consortium plans to do return-on-investment studies to show the long-term financial benefit of investing in loss-prevention measures.  

The formation of the consortium is “a logical fit because we’re basically asking the same questions,” said Philip J. Klotzbach, a senior research scientist in the Department of Atmospheric Science at Colorado State University’s Walter Scott Jr. College of Engineering. “We’re all trying to figure out how to better understand the problem to better be able to prepare for it.”

Mr. Klotzbach said bringing together various interested stakeholders should lead to more productive discussions and results. “This is trying to get a better conversation going between the builders, the insurance companies” and others, he said.  

Ian Giammanco, lead research meteorologist at the Insurance Institute for Business & Home Safety, which uses NOAA data, said efforts to improve resilience can reduce damage and lower insurance costs.

Many insurers provide discounts for structures with “FORTIFIED” designations, he said, explaining the program is a science-backed construction standard proven to reduce damage when severe weather strikes.

Dr. Ian Giammanco noted that while a FORTIFIED Roof adds 5% to 13% more in costs compared with a conventional re-roofing project, a recent IBHS report found that Florida’s modern building code, which is nearly identical to the IBHS FORTIFIED Gold standard, offered homeowners a return on investment of 8 to 1 in terms of the damage prevented versus the additional cost.  

When Hurricane Sally hit coastal Alabama in 2020, nearly 17,000 FORTIFIED homes were threatened, and more than 98% of them came through the storm without an insurance claim, Mr. Giammanco said.