Insurance and Climate Change column

U.S. Financial Stability Oversight Council to ID More Climate-Related Risks

By | July 28, 2022
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The Financial Stability Oversight Council convened on Thursday to identify and address climate-related financial risk.

The FOC last year published an extensive report on climate-related financial risk and issued dozens of best-practices recommendations to U.S. financial regulators to identify and and deal with climate-related risks to the financial system. The council on Thursday said it would advance the work to promote the resilience of the financial system to climate risk.

The FSOC was also planning on Thursday to announce the creation of the “Climate Data and Analytics Hub,” an independent bureau housed in the Treasury’s Office of Financial Research. The hub will enable participants to integrate wildfire, crop condition, precipitation, and other climate-related data with financial data.

Among the efforts the FSOC laid out in a fact sheet ahead of Thursday’s meeting were enhancing public climate-related disclosures, assessing and mitigating climate-related risks that could threaten U.S. financial stability, and filling climate-related data and methodological gaps.

“As part of its statutory mission to identify and respond to emerging threats to U.S. financial stability, the FSOC remains committed to building on and accelerating efforts to address climate-related financial risks and safeguarding the financial system from those risks,” the fact sheet states. “The FSOC and its members will continue its work to enhance coordination, build capacity, and promote the resilience of the financial system to the risks posed by climate change.”

Ohio

Ohio will have to increase annual municipal spending by between $1.8 billion to $5.9 billion by midcentury to adapt to the challenges from climate change.

That’s a conservative estimate from a new report from the research group Scioto Analysis. The public policy report, The Bill is Coming Due: Calculating the Financial Cost of Climate Change to

Ohio’s Local Governments, notes that most of the costs of climate change are expressed in 2021 dollars – meaning simple inflation alone will drive up those costs.

Additionally, the amounts cited represent only 10 of the 50 impacts identified by the report, because the other costs ere difficult to calculate statewide. In other words, the total increase in annual spending by municipal governments due to climate change is likely much higher than the report suggests, according to the report’s authors.

The report breaks down annual estimated cost impacts of climate change by categories, including: Drinking water treatment ($580 million to $2.2 billion); elevating roads ($860 million to $1.7 billion); road repair ($170 million to $1 billion); cooling centers ($52 million to $590 million); stormwater management ($140 million to $150 million).

The report suggest that municipalities should consider alternatives to raising taxes or seeking federal government assistance to deal with the impacts of climate change.

“Instead of relying on taxpayers to bear these costs, policymakers could consider alternative funding sources, such as holding accountable the corporations most responsible for causing and exacerbating climate change, and ensuring they pay their fair share of the costs of adaptation and resilience, just as many Ohio communities have held opioid manufacturers accountable for the costs of the opioid crisis,” the report states.

Aon & Fingerprints of Climate Change

A new report from Aon said “the fingerprints of climate change” were more apparent in individual weather events and longer-term temperature and precipitation trends in the first half of 2022.

The report was published by Impact Forecasting, Aon’s catastrophe model development team, and covered this week in an article on Insurance Journal.

According to the report, insured losses from global natural disaster events were estimated at $39 billion during the first half of the year. That was 18% higher than the 21st century average of $33 billion, thanks largely to persistent severe convective storm events, which in the U.S. and Europe alone accounted for 54% of total insured losses, according to Aon.

There were 197 notable natural disaster events recorded by Impact Forecasting during the period, above the 21st century average of 192, with seasonal flooding in China ranking as the costliest loss event at $8.7 billion.

“From a hazard perspective, the fingerprints of climate change continued to become more evident in individual event behavior and longer-term temperature and precipitation trends in 1H 2022,” the report stated. “Warmer than average temperatures were cited across a broad swath of the globe which aided in more unusual weather patterns that were already set in motion by the primary influence of La Niña conditions which have been ongoing for nearly three consecutive years.”

Sea Level Rise

Future sea level rise could expose about 720,000 more people to flooding in the coming decades in New York City, Washington, D.C., and Miami-Dade County, according to an NPR analysis based on modeling from the National Hurricane Center for the three regions.

The analysis used hurricanes Sandy, Isabel, and Irma as benchmarks to understand how the impacts of storm surge could grow.

“In all three regions, flooding from storm surge that once lingered along the coast travels miles farther inland and grows deeper,” states an NPR piece covering the analysis.

By 2080, when sea level rise could reach more than three feet, flooding would engulf even more critical infrastructure, including hospitals and schools that often provide shelter, according to the analysis.

In Miami-Dade, an NPR analysis using data from the 2020 Census found the number of people at risk could nearly double by 2080 based on NOAA’s likely sea level rise projection of just over 2.5 feet.

NPR’s analysis shows the number of people in New York threatened by flooding could grow from roughly 207,000 in 2020 to 468,000 in 2080.

The analysis found things far less grim for Washington, D.C., where sea level rise means 2,100 residents are likely to be threatened by a massive storm in 2080, up from 600 people in 2020.

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