In recent years, natural disasters have been growing in intensity and severity, with the United States routinely experiencing losses in the billions of dollars. Whether hurricanes in the Southeast, droughts and wildfires on the Pacific Coast, or flooding and winter storms in the Midwest, businesses across the country now regularly experience extreme weather-related property damage.

Unfortunately, there is no sign that natural disasters will decrease in the future. Many scientists and insurance professionals believe climate change has contributed to the trend of stronger storms and increased droughts, and underwriters are now incorporating climate change into their property and casualty pricing modeling.

Businesses should consider preparing for property damage through an in-depth emergency management plan and a comprehensive business interruption insurance policy protecting against natural disaster-related damages. Risk mitigation planning is especially important for companies that rely heavily on customers or raw goods from disaster-prone areas, such as the Southeast or California. Contingent business interruption may be necessary to avoid losses.

The Role of Climate Change

Climate Change is a Concern for Property & Casualty Insurance

The consensus in the property and casualty insurance sector is that climate change is an existential threat facing humankind, requiring drastic action to curb potentially catastrophic environmental changes.

In 2021, Chubb CEO Evan Greenberg stated that “we are seeing changes globally in the frequency and severity of the perils such as tropical storms, wildfires and floods.” He added that the increased precipitation and likelihood of severity of the storms would increase the amount of loss stemming from these events.

AIG’s tone concerning climate change has shifted dramatically in the past ten years. After Hurricane Sandy in 2012, the insurance giant published a report addressing the phenomenon while still questioning the scientific consensus that humans cause climate change. In 2022, AIG has now committed to reaching net-zero emissions by 2050 through underwriting and investments portfolios.

“As a global insurer, AIG is in the business of managing complex risk, so we are in a prime position to promote sustainable action,” said AIG Chief Sustainability Officer Jennifer Waldner Grant.

Why are Insurance Companies Now Taking an Interest in Climate Change?

Natural disasters are growing more intense, costing businesses and insurance companies more money than ever. With these changes, organizations across the country must prepare for the possibility of severe property damage and higher insurance costs. Simply put, insurance companies understand the growing financial threat climate change poses and are positioning their pricing to offset potential losses.

by Blake Berscheid

Senior Property Claims Director