Insurance and Climate Change column

Is Climate Change Making Drought One of the Nation’s Costliest Disasters?

By | October 22, 2020

Drought has become one of the costliest disasters in the U.S., causing 94 deaths and an inflation-adjusted $6.2 billion in losses per year on average since 1980, according to a report out this week from Climate Central.

The report includes an analysis of state-by-state drought vulnerability, based on new research assessing exposure, sensitivity, and states’ adaptive capacity to respond to drought.

The U.S. Drought Monitor shows roughly 39% of the U.S. land area in a moderate to exceptional drought that is affecting more than 74 million people, while NOAA recently predicted that southern parts of the U.S. may experience expanded and intensifying drought during the winter months ahead, due to the La Niña climate pattern.

Climate Central is an independent organization comprised of scientists and journalists researching and reporting about climate change and its impact on the public.

Source: Climate Central

Other findings from Climate Central include:

  • The West and Northeast, as well as sections of the Midwest are currently experiencing severe-to-extreme drought.
  • In the U.S., only tropical cyclones have caused more costly climate-related disasters than drought over the past 40 years. Since 1980, droughts have been responsible for the deaths of nearly 4,000 Americans, and more than $250 billion in total costs, according to NOAA’s analysis of billion-dollar disasters.
  • The impact of drought is expected to worsen in the future as the climate continues to warm.

Flooding from King Tides

Sea level rise is causing record water highs during the seasonal king tides in Palm Beach, Fla. King tides are the highest predicted tide of the year.

In Virginia Key near Miami high tides on Sunday, Monday and Tuesday were record high in data that goes back to 1994, and on a Monday high tide was 14 inches higher than the average high tide for Oct. 19, according to an article this week in the Palm Beach Post.

Brian McNoldy, a senior research associate at the University of Miami’s Rosenstiel School of Atmospheric and Marine Science, who keeps track of the Virginia Key tide data, told the paper the that sea-level rise is making it easier to break high-water records.

“The baseline is just that much higher,” McNoldy said.

Sea-level rise at the Key West tide gauge measured roughly 3.9 inches between 2000 and 2017, while South Florida’s coastal waters could rise 21 to 54 inches by 2070 above the 2000 mean sea level in Key West, according to the Southeast Regional Climate Change Compact’s 2019 sea-level rise report.

Florida Gov. Ron DeSantis in July signed a slew of new laws to address climate issues, and require sea level study for construction.

One of the bills DeSantis signed acknowledges that climate change is a growing concern. The new law will require public coastal construction projects to first be reviewed for impacts on the state’s fragile seashore because of rising sea levels.

The signing was hailed by environmentalists as a step in addressing the encroaching ocean in a state with more than 1,300 miles of shoreline and where two-thirds of the 22 million residents live along the coast.

BoE on Climate

A senior Bank of England official said last week that current rules on company disclosures to help markets price in risks from climate change will become mandatory.

“Disclosing your plans can improve your credit rating, broaden your investor base, reduce your cost of finance, and economize on the fixed costs of meeting increasingly vocal investor requests for information,” the BoE’s executive director for markets, Andrew Hauser, told an Investment Association online event.

Britain and several other European countries have been applying principles for companies on a voluntary basis from the global Taskforce on Climate-Related Financial Disclosures, according to Reuters, which reported this week on Hauser’s remarks.

“You can expect it to become mandatory,” Hauser said.

The BoE in July ordered banks and insurers in Britain to implement plans they have drawn up to deal with risks to their businesses from climate change by the end of 2021.

Hauser said more tools are needed to provide incentives for green investment, and consensus on terminology for asset-allocation strategies to provide a “clear and credible” choice for investors, according to the Reuters article.

“For much of the past decade, those three building blocks have been slow to develop, or vulnerable to charges of ‘greenwashing’ or projects, vehicles or investment strategies that are ‘green’ in name only,” Hauser said.

American Family

“American Family Insurance recognizes climate change is causing broad environmental, social and economic impacts that put our customers, communities and industry at risk.”

That statement from the Madison, Wis.-based insurer was part of an announcement on Wednesday that the company is pledging carbon neutrality by 2030.

The company also announced it joined “We Are Still In,” a joint declaration of support for climate action, signed by more than 3,900 CEOs, mayors, governors, college presidents, and others, in support of the goals of the Paris Climate Accord.

According to the announcement, the company considers it a corporate responsibility to take on climate change using advocacy as well as direct mitigation strategies.

In the announcement the company called attention to extreme weather-related events like hurricanes and wildfires becoming more frequent and more severe.

“Climate change is harming the communities and customers we serve, and disproportionately people of color, in addition to the impacts on our industry,” American Family Business Workplace Vice President Kari Grasee said in a statement. “We urge our peer companies to join us in this declaration and in other efforts to mitigate its effects, including by reducing their carbon footprint.”

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