United Kingdom

Building resilience to natural disasters

As climate change continues to influence the frequency and intensity of weather events, it will become increasingly important to build resilience. Andrew Millard, Client Manager at Aon, explains how local authorities can help to prepare and protect their communities.

Whether flooding, storms or extreme weather events, natural disasters resulted in US$232bn of global economic damage in 2019, making the last decade the costliest on record. But, as climate change, extreme weather variability and demographic patterns shift, the effects – and costs – of these types of event will only increase. Aon’s Weather, Climate & Catastrophe Insight report highlights some of the statistics. Of the 409 natural disaster events in 2019, six of the top 10 costliest were flood-related, with inland flooding the costliest individual peril at nearly US$82bn.

In the UK, three windstorms made the tables:

  • Windstorm Erik in February causing one death, more than 15,000 claims and an economic loss of US$55m
  • Windstorm Gareth in March, causing more than 5,000 claims and an economic loss of US$50m
  • Windstorm Atiyah in December, resulting in hundreds of claims and an economic loss of US$50m

Extreme weather events are already making their mark in 2020 too. Following severe winter flooding towards the end of November, especially in Yorkshire and the Humber and the Midlands, Storms Ciara and Dennis brought further flooding in February. Figures from the Association of British Insurers indicate that insurance pay-outs to households affected by these two storms are set to top £360m. (1)

Local authority action

As these weather events become more frequent and more intense, local authorities have an important role to play in ensuring communities are resilient. Under the Climate Change Act 2008, authorities are required to adopt proactive strategies to mitigate against climate change and considerations must be made to the socio-economic effects on the population during the planning process.

Certainly, the financial risks posed by climate change have received increasing attention since 2015, when the Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD). This provides a framework for companies to assess both the physical and energy transition risks from climate change, with the desired goal being that these risks (and opportunities) are disclosed in financial terms via scenario analysis.

Although the framework isn’t mandatory, there are strong indications that both European and UK policymakers intend to legislate financial disclosure on climate risk in some form.

Insurance industry support

The insurance industry, through initiatives such as ClimateWise and the United Nations Principles for Sustainable Insurance, is also exploring ways in which it can support and incentivise its customers to become more resilient to severe weather and natural hazards.

As an example, at Aon, we’re seeing increasing interest from real estate clients to understand physical climate risks and how they affect their risk management strategies over different 10-20-year scenarios. To help these clients understand potential impacts, we’re developing partnerships with start-ups who specialise in analytics that allow trends in physical risk to be quantified.

All of this exploration has also led to questions around resilience. A resilient building in a neighbourhood, city, or region that faces challenges from physical climate risks is not out of the woods. That resilience counts for little if the infrastructure communities depend on is likely to face significant disruption from increasingly volatile severe weather.

Local authorities need to look at climate resilience in a systemic way. Understand, through data and analytics, the material climate risks the community faces and work with utilities, national government, land and property owners, to ensure that resilience encompasses the entire community.

More information

To discuss the issues raised in this article, please contact Andrew Millard at [email protected].

A copy of Aon’s Weather, Climate & Catastrophe Insight report can be downloaded here.

(1) https://www.abi.org.uk/news/news-articles/2020/03/insurance-pay-outs-to-help-customers-recover-from-storms-ciara-and-dennis-set-to-top-360-million/.