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A group of strange bedfellows, including insurers and environmental groups, is teaming up to quantify and demonstrate the role that natural infrastructure such as coastal wetlands and mangrove swamps can play in mitigating property losses from hurricanes and flooding events.
The research is still in its early stages, but these groups hope it will spur increased and upfront investments in natural infrastructure to protect coastal communities — a key source and driver of economic activity in the United States.
Coastal zone counties account for 48% of the U.S. GDP and 42% of U.S. employment, according to a 2016 report published by the National Ocean Economics Program based at the Center for the Blue Economy, Middlebury Institute of International Studies at Monterey in California.
“We want to break this disaster cycle the nation is now caught in,” said Shannon Cunniff, director of coastal resilience for the Environmental Defense Fund in Washington. “We’re nickel-and-diming our investment in our infrastructure that protects us from storms or reduces the impact of storms, and as a result we are putting a lot of money into response to disasters. We want to break that cycle and get more money in before disasters, and do it in a very planned way so that we’re not creating a coastline that is unrecognizable and isn’t valuable as a working coast.” But these experts know there is a need to prove the economic value of investments in natural infrastructure.
“In concept, (natural defenses are) equivalent to engineered defenses” such as levees, said Hosam Ali, director of structures and natural hazard research for Johnston, Rhode Island-based FM Global. “They help in terms of dissipating energy from storms, they reduce the impact of waves on the shorelines and properties. We include them in our maps if we have the data, but I haven’t seen quantification of the impacts to come up with a number that someone can use.”
Much of the data on coastal defenses is not clearly defined, and even when accurate data is found, modelers make assumptions, which leads to substantial variations, he said. “But in concept, if you have the data and you want to show the impact in an area, you can show a flood map that is developed with and without these natural defenses.”
An ongoing effort to study the impact of natural storm defenses drew together an unusual coalition of insurance industry players, risk modeling experts, environmental groups and academics. The University of California, Santa Cruz, The Nature Conservancy and the Wildlife Conservation Society conducted a research project to quantify the economic benefits of coastal wetlands, in association with Risk Management Solutions Inc. and Guy Carpenter & Co. L.L.C., with funding from the charity Lloyd’s Tercentenary Research Foundation and additional support from the Science for Nature and People Partnership.
“What we want to understand is the relationship between the environment and particularly flooding and hurricanes,” said Dominic Christian, chairman of Lloyd’s Tercentenary Research Foundation, executive chairman of Aon Benfield International and CEO of Aon UK Ltd. “This is a massive risk to our industry. We feel very strongly that the more we can understand this risk, the more we can understand the environmental connection to this risk, the better service we can offer to society and clients.”
Coastal wetlands prevented $625 million in flood damages to insured private property, plus business interruption losses, during Superstorm Sandy, according to the 2016 report that emerged from this research project.
While “the total savings are not huge in the grand scheme of things” in relation to the economic losses experienced in the greater New York metropolitan area, the loss reduction demonstrated in certain areas could facilitate conversations about premium reductions and incentives, said Michael Beck, lead marine scientist for The Nature Conservancy and an adjunct professor in ocean sciences at the University of California, Santa Cruz, where he is based.
Overall, the report “really helps make the case” for natural infrastructure spending in disaster recovery initiatives, he said.
“In disaster risk reduction, as much as we would all like to see money spent ahead the storms, the real game is post-storm spending,” Mr. Beck said. “Even though pre-storm spending is more cost effective — there’s plenty of analyses to show that — there’s frankly nothing like a bad event to motivate big spending.”
The next step is to review and identify promising opportunities and geographies for investments in natural infrastructure, said London-based Dickie Whitaker, CEO of Oasis Loss Modelling Framework and chair of the Lloyd’s Tercentenary charity steering group that selected the project. Having tangible outcomes is also important in building toward a future in which specific methodologies can be developed to guide decision-making, he said.
“I think we need to use this type of research to calculate the impact on building structures, on insurance portfolios and society at large,” Mr. Whitaker said.
The Environmental Defense Fund is actively engaged in conversations with reinsurers such as Munich Reinsurance Co. and with RMS for a pilot project to evaluate a segment of the coastline and the risks and benefits of wetlands restoration, possibly in Louisiana, Ms. Cunniff said.
“From an insurance perspective, we’ve seen the benefit of flood defenses and the positive impact that has, especially around New Orleans and up and down the Mississippi River,” said Carl Hedde, head of risk accumulation for Munich Reinsurance America Inc. in Princeton, New Jersey.
“Down the road, I think these will be treated similar to the flood defenses we have, but I think from an insurance perspective it’s a little bit early because a lot of research is still being done. There are some natural defenses in place, and I think it’s going to take some time to quantify the protections that are afforded.”
Investments in coastal gray infrastructure such as roads and bridges far outstrip the funding for green infrastructure such as wetlands and reefs, but a more balanced investment portfolio could prevent billions of dollars of storm damage, according to a study.