St. John’s Conference Highlights Impact of Climate Change on Insurance Industry

June 12, 2024

Potential solutions to the insurance industry crisis imposed by climate change brought executives, economists, thought leaders, and government policymakers to St. John’s University’s Maurice R. Greenberg School of Risk Management, Insurance and Actuarial Science on June 10 for a daylong conference aimed at helping the industry navigate new risks and vulnerabilities.

The conference, “Insurance and Resilience in a Changing Climate,” brought approximately 100 industry leaders to the University’s Manhattan, NY, campus, where they discussed the challenges presented by climate change, efforts to mitigate climate-related losses, new strategies to make insurance more appealing to the public, and more.

Hosted by the Greenberg School and sponsored by industry leaders Galway Insurance Holdings, KPMG, Lloyd’s, PartnerRe, RenaissanceRe, Vantage Risk, and W.R. Berkley, the conference is the first in a series of University initiatives designed to equip executives with the knowledge needed to survive in an evolving insurance environment.

In welcoming executives from as far away as Florida, Louisiana, North Carolina, and Texas, Maciek Nowak, Ph.D., Dean, The Peter J. Tobin College of Business and Joseph H. and Maria C. Schwartz Distinguished Chair, explained why such discussions are essential. The Greenberg School is part of the Tobin College of Business.

"From our Manhattan campus that sits just a few feet above sea level to catastrophic heat, wildfires, floods, and storms across the world, the impact of climate change presents a tremendous risk to all of us,” Dean Nowak said. “The question is not when to prepare for and mitigate impact, but how.”

“It's so important for the Tobin College of Business and the Greenberg School to have open, serious conversations like today's about this threat and offer solutions as experts in the field of insurance and risk management,” Dean Nowak added.

Among the thought leaders in attendance was Matthew Kahn, Ph.D. Drawing on a popular culture comparison, Dr. Kahn, Provost Professor of Economics at the University of Southern California, challenged executives to adapt to a changing landscape.   

“Mr. Spock from Star Trek was the one playing three-dimensional chess on the bridge of the Enterprise,” Dr. Kahn said. “Homer from The Simpsons was always happy being blissfully ignorant. In the face of climate change, who are the adults in the room—the ones who are happily ignorant or the ones who are, like me, adaptation optimists?”     

Climate change has been a challenge for insurers since the 1990s. As atmospheric and sea temperatures have risen, insurers have faced increasing liabilities from hurricanes and other extreme storms, wind damage, hail, earthquakes, and wildfires. That has forced some insurers to increase premiums, cut back on coverage, or exit states entirely.

“We are in uncharted waters and the insurance market is doing what it can,” said Paul Martin, Vice President of State Relations at the lobbying agency, the Reinsurance Association of America. “None of us here can do anything about the weather or the cost of building materials, but we can advocate for improved building codes and land use, improve mitigation efforts, work for greater underwriting freedom, and balance the need to protect consumers with the need to restrict litigation costs.”      

According to Gregory S. Hendrick ’87C, Chief Executive Officer of the Bermuda-based underwriter Vantage Risk and a member of St. John’s Board of Governors, development and rebuilding costs are also concerns.

“There are more and more things, meaning homes and businesses, in the way of storms,” Mr. Hendrick said. “And they are going up faster than we in the industry can keep up. Also, the costs of replacing things has escalated faster than the consumer price index. And then there is climate change.” 

Facing more future climate-related losses, some conference panelists called on the industry to reimagine how insurance is presented to consumers.

“There has not been much innovation in the insurance and reinsurance industries,” said Charlie Sidoti, founder and Executive Director of InnSure, a nonprofit focused on inspiring insurance industry change in response to climate issues. “We must pay higher fidelity to total rebuilding costs and risk. Local leaders also need to understand insurability and how the decisions they make about land use affect the insurability of other communities.”

In addition to industry initiatives, panelists discussed ways government and the public could help to stabilize the insurance ecosystem. Builders, panelists said, could offer homeowners the option of higher-quality roofing that provides enhanced protection against wind damage. Owners could be educated to see the value in better roofing over cosmetic upgrades such as higher-end countertops or cabinetry.       

“Environmental damage is increasing and the solutions to it are difficult and politically sensitive,” said Mark J. Browne, Ph.D., Chair of the Faculty, the Greenberg School. “The Greenberg School is a place where leaders in academia and industry who are dealing with important societal problems can come together.”     

Samantha Medlock, Assistant Administrator for Resilience Strategy in the Federal Emergency Management Agency (FEMA), outlined several new governmental efforts to mitigate damage, including the identification of Community Disaster Resilience Zones (CDRZs), where the potential impact of natural disasters is highest. The jurisdiction with the most CDRZs is not in California or Florida, but New York City with 17 zones.

The combination of a deep harbor, dense population, and social and economic inequities leave the New York City area vulnerable in the wake of a natural disaster such as 2012’s Hurricane Sandy. But new partnerships with community organizations designed to increase awareness will help, Ms. Medlock said.

“The CDRZ is a program, but it’s also a movement,” she said. “It is inspiring public-private partnerships consistent with the program’s intention. FEMA and its community partners can build climate resilience with an eye toward equity and environmental justice.”