Insurance Industry Climate Change Roundtable GRC Climate Finance Series September 18, 2015
R OUNDTABLE P ARTNERS CEO network supporting the implementation of the City of Boston Climate Initiative of the UN Office Action Plan for Disaster Risk Reduction Core partner with AR!SE 2
P RELIMINARY CONTEXT We have regulators and We are looking to create a Our intent is We have a number We are focused on limited regulated in the room. partnership with the local identify specific of competitors in set of perils: storm surge, We are operating under insurance and finance sector to actions to take to the room, please precipitation-based Chatham House Rules align insurance incentives and increase climate remember and flooding, sea level rise, to provide a “safe loan underwriting with best resilience of respect antitrust and extreme heat and harbor” for sharing practices in Building Resilience coastal urban statement wind events. insights Measures properties www.theriseinitiative.org September 18, 2015 3
A NTITRUST S TATEMENT Please be reminded that you should never discuss or agree with a competitor concerning any of the following subjects: • Prices, future prices, pricing or pricing policies; buyers and sellers alike have a legal right to buy and sell in a market untainted by anticompetitive agreements, including anticompetitive informal, unwritten understandings; • Specific terms or conditions of doing business with customers; such as specific credit terms and credit availability, discounts, rebates, warranty terms, return policies, and so forth (subjects are viewed by the antitrust authorities as directly or indirectly affecting prices); • Profits or profit margins; specifically related to a customer and/or product; • Specific market shares; of your organization or any competitor; • The nature of a specific bid; including one’s intent to bid/not to bid, for particular business; • A willingness to serve only certain customers or territories ; or to build only certain types of products; • An intention or willingness not to serve a particular customer; to purchase only from a particular supplier, or to restrict existing or future cooperation with another competitor; and • Negative, derogatory or untruthful remarks; about any supplier, distributor or customer 4
S ETTING THE L OCAL C ONTEXT • Boston is the fourth most at risk city in the U.S. for costs of damage from coastal flooding • End of Century sea level rise is likely to be in the 5 foot range • The City of Boston is launching a major Climate Preparedness Initiative • Boston’s economic future depends on property insurance being available and affordable 5
7% OF B OSTON FLOODED 100-year flood level in 2015 = annual flood in 2050 = daily high tide in 2100 Colored Area = Today’s high tide, plus 5.0 feet of SLR and storm surge Source: Preparing for the Rising Tide, Boston Harbor Association, 2013 6
30% OF B OSTON FLOODED 100-year flood in 2050 annual flood in 2100 Colored Area = Today’s high tide, plus 7.5 feet of SLR and storm surge Source: Preparing for the Rising Tide, Boston Harbor Association, 2013 7
T HE C HALLENGE How do we maintain long-term property value and insurability in Boston, in light of projected climate risks? 8
M ILESTONES February 2013 Mayor Menino asks the GRC to form a Climate Preparedness Working Group. November 2013 GRC Working Group delivers its recommendations to the November GRC meeting, including insurance recommendations. March 2015 US launch of AR!SE held in Boston, with a breakout session on Insurance and Finance September 2015 Insurance Climate Roundtable 9
GRC N OV . 2013 I NSURANCE R ECOMMENDATIONS “The goal of these recommendations is to build a partnership between local insurers, financial institutions and property owners to align insurance policies with desired property resilience actions and create access to capital to finance those actions. 1.Define resilience standards for existing buildings. 2.Work with insurance brokers and property owner trade associations to educate property owners regarding climate risks and resilience 3.Improve awareness and understanding of resilience insurance and finance products and services. 4.Work with the State Insurance Commissioner to encourage climate-smart insurance policies.” 10
AR!SE B OSTON L AUNCH D ISCUSSION Q’ S 1) How should insurance companies embed risk tolerances into short and long term policies and approaches? 2) What regulatory and legal changes can help promote investment in resilience? 3) How can Boston demonstrate leadership in creating resilient finance and insurance approaches? 11
T ODAY ’ S D ISCUSSION H ITS A LL AR!SE T HEMES ✔ ✔ Insurance Strategies ✔ ✔ Investment Cities metrics AR!SE Themes Legal & Benchmarking Regulatory & Standards Education ✔ ✔ & Training ✔ 12
“I T ’ S C OMPLICATED ” Property Owners City Government Insurers & Reinsurers Stakeholders In “Keeping Boston Financiers Insurable” Regulators Tenants Taxpayers 13
“I T ’ S REALLY C OMPLICATED !” W HO ARE SOME OF THE KEY PLAYERS AND WHAT ARE THEIR MOTIVATIONS ? Property City (Re)insurers Regulators Tenants Financiers Citizens and owners government taxpayers • Issues 1+ year • Insurance • Short-term • Limited interest • Resiliency • Must coordinate policies that do markets “ highly perspective; can in resiliency • Often most “ at actions not resiliency not align with regulated, quickly move improvements risk ” sufficient to actions at macro long-term risks short-term, out of “ at risk as they do not stakeholders “ move the level • Covers specific backward properties ” usually hold (taxpayers may needle ” on an • Concerned with perils, not broad looking and • Limited and/or investments for act as “ funders individual basis long-term “ climate risk ” slow to no entire asset life of last resort ”) • More effective ability of city to coverage innovate ” responsibility • Hard to • Do not efforts exist at recover from • Exclude certain • Regulation for resiliency leverage understand portfolio and/or disasters perils (heat written by • No incentives to potential tax Gordian knot of community • Primary player events, separate state invest in rented benefits ownership and level to orchestrate flood/sea level insurance property • Does not responsibilities • As no “ reward ” actions at rise) commissioners • Limited manage • Mobilized by exists for taking regional and/or • Limited by • Limited incentive to pay properties; media and action, property community regulation or incentives to premium rents limited stakeholders owners have level reinsurance coordinate on for risk-resilient authority to who might have few incentives • Experimenting considerations regional and/or properties promote incomplete data to improve with models of national basis improvements properties insurance to protect assets 14
O UR T EAM E XPERIENCE … “Good heavens, Stuart. We are going to need the net!” 15
W HAT W E W ANT T O A CCOMPLISH T ODAY 1. Advance a common definition of Building Resilience Measures 2. Create strategies for engagement between insurance and property owners 3. Understand City of Boston current/proposed activities and how property owners and insurers can support them 4. Develop a shared agenda for State policy changes to align insurance and building code practices 16
R EMEMBER T HE C HALLENGE How do we maintain long-term property value and insurability in Boston, in light of projected climate risks? 17
A GENDA R EVIEW – AM Time Topic Presenter 9:20 Resiliency Challenges in Massachusetts Daniel Judson, MA Commissioner of Insurance 9:30 What Actions Is the Federal Government Taking? Samantha Medlock, White House CEQ 9:55 FEMA’s Role in Perils Facing Boston Dean Savramis, FEMA Region 1 10:15 Why Are Resilience Investments Important? Peter Civitenga, AIR 10:45 Break 11:00 Framing Insurance Markets Cynthia McHale, Ceres 11:10 What Products and Services Are in the Local Market? Nick Shufro, PwC 11:25 Innovation Example – Reinsurance Kirk Metcalf, Willis 11:35 Innovation Example – Resilience Standards Doug Pierce, Perkins + Will 11:50 Going Beyond Boston and the Commonwealth Nick Shufro, PwC Glenn Dolcemascolo, UNISDR Olivia Darby, Willis 12:00 Pre-Lunch Wrap Up and Discussion John Cleveland, GRC 18
A GENDA R EVIEW – PM Time Topic Presenter 12:20 Lunch and Presentation: Austin Blackmon, Chief of “Resiliency Plans and the Climate Action Energy, Environment and Open Plan” Space, City of Boston 1:00 What Is the City of Boston Do to Advance Carl Spector, City of Boston Resiliency in the Property Sector? 1:30 How Can State Insurance Policies Advance Cynthia McHale, Ceres Climate Resilience in the Property Sector? George Bradner, Connecticut Katherine Greig, New York City Daniel Judson, Massachusetts Macky McCleary, Rhode Island 2:30 Break 2:45 Voice of the Customer –What Do We Need to David Straus, ABC Do to Improve Resilience? David Begelfer, NAIOP Greg Vasil, GBREB 3:15 Next Steps and Closing John Cleveland, GRC 3:30 Adjourn 19
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