The Role of Insurance in Financing Natural Infrastructure

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Sage Melcer

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Since 1980, there has been $5.2 trillion in losses from natural disasters – over 70 percent of which was uninsured. Worldwide, governments have traditionally held this risk by financing emergency services, restoring infrastructure, and supporting households without private protections. Businesses also face higher risks from natural catastrophes, with losses manifested via resource scarcity, supply chain shocks, and loss of business. However, increased loss events leave the public and private sectors struggling with how to manage future operating uncertainty. Additionally, climate change requires engineered protection enhancements – often resulting in increased costs with more frequent repairs. Experts have realized that effectively integrating natural systems into disaster mitigation planning is a cost-effective and sustainable way of reducing natural disaster risk and optimizing built infrastructure’s functionality. Investing in nature-based solutions also improves the effectiveness of ecosystems, community facilities and quality of life. Unfortunately, quantifying natural asset protection value is challenging as efforts to calculate current and future risk attenuation and exposure lack standardization sufficient to compare value, efficacy, and justify investment. The insurance industry is uniquely positioned to apply its expertise towards understanding risk potential, identifying and integrating effective mitigators, and internalizing these assets to standardize their role in risk attenuation. Additionally, insurers’ role as a risk transfer agent can de-risk investment into natural systems by governments and businesses alike. This presentation will discuss how nature-based solutions can be an economically and ecologically friendly approach to climate adaptation, and how insurance can help public and private actors integrate these assets into their risk management strategies.

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Conference Presentation

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