During the past decade, uncharacteristically strong storms have ripped through some parts of the US, causing billions in damage. From Superstorm Sandy pummeling the Northeast in 2012 to more recent snowstorms crippling the Southeast, the weather is growing more unpredictable. With a consensus among the scientific and insurance communities that the climate is changing, super storms are becoming the new normal.
The growing frequency of ‘Frankenstorms’ is bad news for property insurers, who already have experienced extensive losses from recent disasters. Check out some recent losses from climate related events, according to a report by Aon Benfield:
- Hurricane Katrina, August 2005, $66.9 billion in insured losses.
- SuperStorm Sandy, October 2012, $30 billion.
- Nationwide drought, 2012, $20 billion.
- Hurricane Ike, September 2008, $15.2 billion.
- Hurricane Wilma, October 2005, $10.7 billion.
It could get worse. Karen Clark, president of Boston-based Karen Clark & Co. consulting firm, predicts that global warming could lead to a 5% increase in peak hurricane wind speeds during the next 20 years. That increase, in turn, could result in a 30% to 40% increase in property insurance losses.
Climate change poses a complex and potentially debilitating problem that has professionals from all industries scratching their heads. However, there seems to be one promising solution for insurers and property owners alike – green building. Because it in most cases is sturdier than conventional building methods, sustainable construction can help property owners reduce their insurance costs.
While some politicians continue to debate the science of climate change, one thing is for sure. From commercial to residential properties, green building is a booming industry. In fact, in the US alone, green building is predicted to represent over half of all commercial construction by 2016, according to McGraw-Hill Construction’s 2013 Dodge Construction Green Outlook Report.
Green building’s growing list of benefits includes a smaller carbon footprint and higher energy efficiency. For the insurance industry, one benefit stands out from the rest – safety and durability. A 2011 report from the US Green Buildings Council and the University of Michigan suggests that green buildings are more resilient than structures built using standard construction materials and techniques. The study documents that efficiency-focused features may help green buildings and their occupants ride out both long-climate shifts and short-term disasters such as floods or high winds.
Despite some concerns over green building fire safety, insurers have begun warming up to sustainable buildings to their lower risk of storm damage. Storm damage accounts for the majority of property insurance losses. In 2013, severe thunderstorms alone cost insurers $10.3 billion, according to the III. Average homeowner claims from wind and hail damage average $7,177. Commercial building losses can be much larger – buildings are larger and often are filled with expensive equipment and products. With more green buildings, that number could get smaller and smaller.