Investing in resilience against extreme weather creates a virtuous circle, in which insurance savings can be reinvested in further risk mitigation measures.
While there may be extra upfront costs, a more strategic approach to resilience can make a real difference to the cost—and availability—of insurance.
Our survey reveals many as-yet untapped opportunities to act on extreme weather resilience.
For example, the brokers we surveyed rank ‘embedding risk engineering into the design and construction of new sites’ as the most impactful measure that businesses can adopt to mitigate extreme weather risks (see Fig. 4).
There is no doubt that embedding risk engineering for the very earliest stages of a site’s development can dramatically bolster its resilience.
“We had a client building a new site on the coast of Vietnam,” recalls McKenna. “The region was hit by a typhoon, and while practically everything surrounding their site was flattened, our client’s site experienced minimal damage.”
“The difference? Our client’s site was risk-engineered from the outset.”
However, only 28% of risk decision-makers say their company has fully adopted this approach. More (37%) have done so partially; 26% have explicit plans to do so in the future.
“There are a lot of competing priorities involved in the design and construction of a site, and some organizations may not be aware of the resilience that introducing risk engineering at the outset brings, and the economic benefits it delivers,” says Waters.
“We’re all in this together and have the same end goal of resilience, so we need to partner to raise awareness of the risks as well as the solutions available.”
Another under-adopted measure, relative to brokers’ assessment of its potential value, is selecting and installing equipment based on its resilience to extreme weather. Brokers rank this as the fourth most impactful measure, but only 23% of businesses have fully implemented it.
The growing prevalence of extreme weather has prompted many businesses to adopt practical engineering solutions to mitigate their risks, says Keller, especially flood risk.
“Since Superstorm Sandy, there has been a significant adoption of innovative solutions to keep water out of their facilities, such as perimeter barriers to keep water away from the building,” he explains. “Businesses understand that the risk is increasing in a lot of places, and they’re looking for ways to cost-effectively reduce their exposure.”
Even so, our survey also reveals untapped opportunities to address flood risk. For example, 61% of brokers recommended (re)designing interiors to ensure the safe flow of floodwater. Only 20% of risk decision-makers say their organization has taken this advice.
It’s a similar picture for windstorm mitigation. More than half (53%) of brokers believe using wind-resistant fastening for rooftops and outdoor equipment is the most effective approach, but only 24% of risk decision-makers report having done so.
Likewise, when mitigating wildfire risk, 66% of brokers recommend installing automated detection systems; only 28% of risk decision-makers say their employers have fully adopted them.
Strategic measures to mitigate extreme weather risk
Businesses are leaving some simple and impactful engineering measures to mitigate extreme weather risk on the table. But, encouragingly, many are taking a broad, multifaceted approach to managing them and are looking far beyond their own operations to secure that resilience.
For example, three-quarters (72%) of risk decision-makers surveyed say their organization is rethinking its global sourcing strategies, 52% regularly review their suppliers’ exposure to extreme weather, and 50% have some kind of contingency plan in place to manage disruption to global infrastructure.
“Companies understand there are multiple reasons to be concerned about offshore operations or global supply chains, and they’re starting to bring operations closer to home to help mitigate their natural hazard-related risks. Those are the companies that are going to do very well,” says Dr. Gritzo.
Some companies are making strategic decisions about whether they want to keep operating in locations exposed to natural hazards, and the location of their operations is becoming an increasingly important strategic consideration.
“The reality is that in today’s climate, it is difficult to find a location where there is no exposure to natural hazards. We used to think of the US mid-west and parts of central Europe as good locations, but now we’re seeing extreme precipitation in new places, as well as hail risks and some shifting patterns in tornadoes,” Dr. Gritzo explains.
Regardless of the strategic or tactical measures that corporates employ to improve their resilience to extreme weather, they can be easily undermined if employees lack the necessary awareness or training. Risk awareness must flow down from senior leadership into every part of the organization.
“A well-maintained, rehearsed, and tested emergency response plan can make the difference between complete disaster and a relatively quick cleanup when extreme weather strikes,” says Lanzilotto.
“It’s about ensuring people know their roles within the plan and can respond when needed. The effectiveness of the recovery plan is predicated on the availability of tools and contractors to clean up after the event, as well as having contracts in place to ensure cleanup and restoration experts have the capacity to support.”