Filed Under:Risk Management, Weather Risk

Insurers React to Obama's Plan to Fight Climate Change

Issues central to the insurance industry will be tackled as part of the ambitious three-pronged climate-change plan President Obama unveiled June 25.

These include flood insurance, and perhaps a stronger private role in the federal flood insurance program, uniform and stronger building codes, and mitigation programs aimed at reducing the cost of dealing with such issues as Superstorm Sandy.

The plan will also seek to incentivize policyholders to take steps to reduce their exposure to these risks.

This will be done, the president said, with input from the insurance industry and in recognition of the “critical role that the private sector plays in insuring assets and enabling rapid recovery after disasters.”

“We endorse the President’s proposal to convene an insurance sector group to focus on best practices and processes for assessing climate risk,” said Frank Nutter, RAA president. “Since the reinsurance industry has been a leader in assessing extreme weather and climate risk, as well as how to finance the costs associated with the consequences of both, we look forward to working with the administration on this important initiative.”

The president’s plan voices strong support for “a comprehensive, community-based resilience framework” that includes “guidelines for consistently safe buildings and infrastructure."

Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Comapnies adds, "As a strong advocate for disaster mitigation, NAMIC welcomes the opportunity to work with the Obama Administration and other stakeholders to explore ways for our nation to prepare for extreme weather. Virtually every study of the issue has shown that the most effective steps for reducing the damage should be taken before a storm can strike, and there are already proposals in Congress that the Administration can support to achieve those goals."

Obama's plan also embraces dealing with the challenges climate change will place on the National Flood Insurance Program, as cited in a report issued by the Federal Emergency Management Agency this month.

“The RAA has long supported a private sector role in underwriting flood risk, and this requirement is particularly critical to achieving that goal,” Nutter says.

The action plan also proposes “actionable” science to be funded by the federal government, as well as open access to climate data gathered by federal agencies.

The program Obama outlined calls for using his executive powers to require reductions in the amount of carbon dioxide emitted by the nation’s power plants.

It also calls for new federal funds to advance renewable energy technology. The insurance industry would be involved through the third prong, federal spending and private initiatives aimed at fortifying cities and states against the ravages of storms and droughts aggravated by a changing climate.

The component of the action plan outlined by the president Tuesday dealing with “boosting the resilience of buildings and infrastructure was contained in legislation pushed by the BuildStrong Coalition and introduced in the House and Senate May 8th and 9th.

The legislation is the Safe Building Code Incentive Act. The bill is  S. 924 in the Senate and H.R. 1878 and its chief Senate sponsor is Sen. Robert Menendez, D-N.J., and its chief House sponsor is Rep. Mario Diaz-Balart, R-Fla.

 Under the legislation, incentives would be provided for states to adopt and enforce model building codes that meet minimum life safety standards.

Qualifying states would be eligible for an additional four percent in post-disaster grants from the Federal Emergency Management Agency. According to officials of the BuildStrong Coalition, 21 states currently enforce statewide building codes.

The president’s plan calls for the National Institute of Standards and Technology to convene a panel on disaster-resilience standards to develop a comprehensive, community-based resilience framework and provide guidelines for consistently safe buildings and infrastructure – products that can inform the development of private-sector standards and codes.

Amongst other initiatives, the president mandated that in August, his Hurricane Sandy Rebuilding Task Force deliver to the president a rebuilding strategy to be implemented in Sandy-affected regions and establishing precedents that can be followed elsewhere.

Amongst other initiatives, the action plan said that, with partners, the Army Corps of Engineers is conducting a $20 million study to identify strategies to reduce the vulnerability of Sandy-affected coastal communities to future large-scale flood and storm events, and the National Oceanic and Atmospheric Administration will strengthen long-term coastal observations and provide technical assistance to coastal communities.

 

 

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