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High hopes for infrastructure resiliency under Trump

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Insurers are optimistic that the incoming Trump administration will see the value in focusing on making new and existing infrastructure more resilient to natural catastrophes and build on a resiliency road map released in the last days of the Obama administration.

In late December, the White House Office of Management and Budget published a Standards and Finance to Support Community Resilience report that draws on government and industry studies to make the case that investments in resilience reduce disaster costs and call for further action to improve resilience to natural catastrophes.

“The Obama administration comes at this issue from a climate perspective, which is fine and appropriate,” said Julie Rochman, president and CEO of the Insurance Institute for Business & Home Safety in Tampa, Florida. “I think the next administration is going to come at things more from a fiscal responsibility and budgetary perspective, and this road map should be just as valid and just as appropriate for them. There have been a lot of Republicans on Capitol Hill who have engaged in the resilience conversation.” 

Munich Reinsurance Co. committed to invest in new research in 2017 on the costs and benefits of approaches to siting, building and maintaining manufactured home structures to reduce the damage done to these homes in coastal and inland events as part of this effort. 

“This report was a culmination of the work this administration did and it really serves as a road map for the next administration to pick up the cause and continue working down that path,” said Carl Hedde, head of risk accumulation for Munich Reinsurance America Inc. in Princeton, New Jersey.  “The report also showed some very concrete steps that can be taken not just by the insurance industry, but by other partners, and also serves as a road map for other agencies within the U.S. government.” 

An overall theme of the report focuses on shifting the mindset on resiliency from being a cost to being an investment, as research conducted by the institute and insurers has demonstrated that small investments in resiliency can make a difference in protecting infrastructure from the worst impacts of natural catastrophes, experts say.

“This is moving a little up front to save a lot of money down the road,” said Louis Gritzo, vice president of research at FM Global, which will conduct on-site risk assessments and provide risk improvement recommendations to about 4,500 schools, hospitals and transportation-related facilities as part of this effort. “By being wise about investing a little money on the front end, you can reap the benefits over a long-term operation of a facility. Then the challenge becomes how do you make those wise decisions about where to put the money and where does the money come from?” 

Balancing the resources devoted to ensuring the resiliency of new and existing infrastructure is both critical and challenging, particularly when deciding whether to invest in the resiliency of an existing building or to move operations to a less vulnerable location, experts say. 

“That’s where the details really become important,” Mr. Gritzo said. “What’s the condition of the current facility? What’s its future life span? What’s both the frequency and the severity of the risks that it faces? That starts to play into that return-on-investment decision. We do see our clients that when they realize they have a few of these very high-risk locations, they will seize the opportunity to locate those operations elsewhere, to build in a more resilient fashion elsewhere and essentially shed those risks.”