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Insurers, reinsurers pledge support for community resilience

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Insurance industry stakeholders welcomed a White House Office of Management and Budget report that outlines efforts to improve resilience to natural catastrophes, with several insurers and reinsurers committing capacity to cover these exposures or access to technological tools to assess the risks.

The OMB’s Standards and Finance to Support Community Resilience report draws on government and industry studies to make the case that investments in resilience reduce disaster costs and call for further action.  

“Despite significant U.S. investments in preparedness and resilience, extreme-weather-related losses and costs in lives, property and natural resources continue to mount,” the report stated. “Risk models indicate that the annual likelihood of severe weather causing at least $1 billion in insured losses in the U.S. is 92%, or almost certain to occur every year.”

The report identifies opportunities for continued collaboration between the federal government and the private sector and ways to help ensure future investments will be climate-smart from the start, according to a White House blog post on Wednesday. 

Julie Rochman, president and CEO of the Insurance Institute for Business & Home Safety in Tampa, Florida, said she was particularly excited about the enabling and accelerating resilience section of the report.

This section described mechanisms for providing incentives to encourage resilience such as facilitating private reinsurance and capital market participation to backstop the National Flood Insurance Program and developing a federal disaster deductible to promote private investment in resilience as well as tax incentives such as resilience retrofit tax credits similar to energy efficiency and renewable energy tax credits.

“There’s no argument on the public-sector side or the private-sector side that resilience is necessary, that it is a good thing,” she said. “Nobody is opposed to resilience. They may be opposed to the cost of making certain structures more resilient than they are, because the question is who’s going to bear the costs.”

Swiss Re. Ltd. will offer up to a total of $2 billion of financial risk capacity to U.S. public entities over the next five years as part of this resiliency effort, according to the blog post. The reinsurer will also discuss the risks associated with natural disasters with public entities and provide access to CatNet, a proprietary geo-risk tool designed to provide assessments of natural hazard risk on individual locations or entire portfolios of assets, to selected public entities. 

FM Global will conduct on-site risk assessments and provide risk improvement recommendations to about 4,500 schools, hospitals and transportation-related facilities and advise owners of these facilities about federal programs that can help them secure favorable loans for improving resilience, according to the blog post. 

Munich Reinsurance Co. has 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, according to the blog post. 

“You have to get away from the first-dollar mentality to a cost of ownership mentality and what’s the rate of return, over what period are you going to get back what you spent and have some additional value added on top of that,” Ms. Rochman said. 

Robert Gordon, senior vice president, policy development and research at the Property Casualty Insurers Association of America in Washington, also welcomed the report. 

“Natural catastrophes can happen anywhere in the country and at any time,” he said in a statement on Wednesday. “From drought and wildfires, to tornadoes and hurricanes, to flooding and winter storms, the cost of natural disasters is rising.”