As Climate Change Grows So Do Insurance and Risk Challenges For Coastal Communities
COMMUNITY
Writer: Vilborg Einarsdottir
Photographs: David Wright, Justin Levesque, Jessie Davis
November 2019
“From a business standpoint, and at the global level, my industry is facing unprecedented challenges due to climate change. Larger and more frequent climate-driven disasters are proving ever more expensive in terms of claims, the models that predict risk are scrambling to adapt to an ever more chaotic climate - and reinsurance, the paper that the industry uses to insure the insurer, is becoming more and more costly,” says Daniel Bookham, speaking to JONAA from an insurance standpoint about the diverse challenges faced by coastal communities increasingly effected by climate change. Bookham is an insurance executive on the agency side of the industry who lives in Rockland, Maine and who works with commercial clients throughout the US, primarily in the marine and manufacturing sectors.
“Of course I can only speak for myself, but this is the short version of what is happening and the only thing for certain in an otherwise uncertain future, is that climate related challenges will only grow. We face rising flood tides and sea levels in general; changes in precipitation patterns which can impact both crops and livestock as well as fisheries, tourism, and other drivers of the Maine economy; invasive species damaging the health of the trees, plants, fish, birds, animals and humans of Maine; warming waters that are changing the behaviors of commercial fish - and shellfish species; and will share in the economic and social shocks caused by national and global climate change impacts.”
Images from coastal regions of Maine. All pictures JONAA©David Wright
A population concentrated in coastal or tidal river-port communities
The state of Maine may be amongst the most sparsely populated US states with roughly 1.3 million inhabitants, but it has a long coastline and it is along this North Atlantic coastline where the majority of Mainers live and where most of the state’s infrastructure and businesses are set up. Like other North Atlantic coastal communities, Maine faces growing weather-driven losses originating in climate change, a development clearly noted by the insurance industry.
“If laid out in a straight line our coastline would extend around 3.500 miles or 5.500 km and be roughly the equivalent distance of the entire US east coast from the Canadian border to the tip of Florida. While it is relatively sparsely populated in comparison to other US coastal states, the majority of Maine’s population is concentrated in coastal or tidal river-port communities. And Portland, our largest city both in terms of population and economic impact sits on the waterfront along the Fore River and Casco Bay,” says Bookham.
The topography and ecology of the coast of Maine changes south to north, with sandy open beaches south of Portland, to increasingly rocky shoreline heading ‘down east’ towards Canada. In several areas, including Portland, island archipelagos sit relatively close to shore creating a shield from some of the worst of the weather, and the Gulf of Maine itself is somewhat sheltered, if prone to sustained and strong winds.
“We are seeing insurance companies respond to these threats across their books of business at a regional, national and international level.” Daniel Bookham, insurance executive in Maine. JONAA©Jessie Davis
Natural protections from a harsh and potentially deadly climate
“Many of the permanent settlements founded following the arrival of Europeans from the 17th century onwards were usually built on or adjacent to native habitations, often at unacceptable cost of violence and oppression directed at the original population, with a view to making use of natural protections from what has always been a harsh and potentially deadly climate. This early example of climate-resilient planning continues to help protect Maine communities,” but, as Bookham points out, “nobody knows for how much longer.”
“While the Gulf of Maine is the fastest warming body of water in the world, the influence of the Gulf Stream, cold air from the Canadian Arctic Shield, our coastal climate, and our relatively northern location are currently continuing to have a moderating effect on the more rapid and extreme weather events spun up by the changing climate,” says Bookham.
“All of this is essentially a round-about way of saying that the threats posed to Maine by climate change are not yet those of a hard hit from a strengthened hurricane or an intense baking drought, but rather those of a more insidious- and in many ways more dangerous - nature.”
With the Gulf of Maine being the fastest warming body of water in the world, impacts are clearly felt in this state where the oceanfront and the waters play such a big role for both recreation and work. All pictures JONAA©Justin Levesque
How is the insurance industry responding?
“In my sector of insurance and risk management, we are seeing insurance companies respond to these threats across their books of business at a regional, national and international level, meaning that Maine customers will not only have to come to terms around new realities of coverage and premium based on changes to risks locally, but also based on those headline-grabbing threats to places like Florida and the US Gulf Coast,” explains Bookham.
“Within the insurance industry the response is being driven by changes in the risk models used to determine rates and premium and by the need to update and refine the way those models are created. Setting aside the inevitable arguments around the causes of climate change - and for the record I’m personally in the anthropogenic camp - it’s a rare bird in the insurance industry, especially at the insurer level, who doesn’t recognize that climate change is real, that it is accelerating, and has adverse impacts on humans as well as all other species. However, knowing this and understanding how to better model the risks that climate change poses are not the same as driving the changes needed to slow, if not stop, the ongoing damage.”
I personally don’t know if our industry is big enough, powerful enough, or united enough to make that kind of an impact, nor are we necessarily keeping up with the rapid pace of change or the increasing violence of extreme weather events. That said, as insurers respond to the data coming out of their risk models there are two blunt instruments that will be deployed more and more: premium and a refusal to write a risk at all.
“The higher the risk, the higher the premium is the fundamental basis of insurance underwriting. We are already seeing this in action in the United States with recent changes to federal flood maps and the resultant increase in insurance costs for commercial flood insurance policies. Congress, for instance, put a thumb on the scale to help keep homeowner’s flood premiums lower but it’s still not a cheap proposition if your property is in a high risk zone. As that applies to Maine, the remapping came as an unpleasant surprise to several communities once considered to be low risk on the flood front who now found themselves rated as much more exposed to flood waters due to changing environmental conditions and improved data collection.”
“The more drastic approach is to refuse to insure something altogether due to the risk being too high. This is a rare approach as in a competitive free market there’s usually someone with a broad enough risk appetite to write even the toughest exposures, but in these cases, cost may be the ultimate deterrent,” says Bookham.
A rocky beach in Maine. JONAA©Justin Levesque
As a species, humans are terrible at risk assessment
“I’d have to say not yet: it’s still too early for the impacts to be felt,” says Bookham when asked if changes in response to climate change effects are already having an impact. “Ironically given the state of many actual glaciers, the cliché ‘glacial pace’ still applies to much price-driven behavioral change. Because of this I’m pessimistic about the likelihood of market-driven changes to insurance having much of a broader impact outside of our industry. The fundamental problem with looking to insurance as a tool for modifying behavior is that as a species humans are terrible at risk assessment.
Our brains have yet to fully catch up to modern threats and we still have a core set of fears from our ancestral home on the African savannah, meaning for example that we are often afraid of snakes but have no issue routinely climbing into speeding metal boxes. I worry that increasing premiums, refusal to write risks, and even clarion calls from risk managers around the world won’t alone move the needle on human behavior and climate change. I’m hoping that I’ll be proved wrong.”
What about general awareness of people and communities in Maine?
“Like most places, Maine has its splits between those of us who accept the reality of anthropogenic climate change and the subsequent climate emergency it has engendered and those who either deny it’s caused by humans or that it is happening at all,” says Bookham. “I would say however that the majority of my fellow Maine citizens subscribe to the former view. I don’t have hard numbers but I would be surprised if Maine’s split on climate change was any different than the ratio in the United States as whole, where Americans who know climate change is real outnumber those in denial by a ratio of more than five to one,” says Bookham and continues, when asked about the main drivers behind growing awareness.
“It’s a combination of factors. Obviously, the examples of Greta Thunberg, Al Gore, Xiuhtezcatzl Martinez, and the other unwilling prophets have global resonance and are heard loud and clear, even in the far northeastern corner of the United States. Maine’s own political history with environmental protection runs deep through the state also. It was for example Maine senator Ed Muskie who pushed both the Clean Air- and Clean Water Acts here in the US back in the early 70s.”
Of equal importance however is the evidence of change occurring before our eyes: southern tick species bringing diseases never before seen in Maine; parasites flourishing in warmer winters and damaging vital forest lands and native fauna; warming ocean waters driving some commercial species out of the reach of our fishermen; and that dim awareness in the back of our minds that something is off and increasingly out-of-kilter with our weather patterns.
“As for awareness of businesses and governing bodies, the State government in Maine is currently controlled by the Democratic Party, and they accept both the reality of climate change and the need to do something about it. Our Governor Janet Mills recently spoke at the UN on addressing climate challenges and Maine’s goal to become carbon neutral by 2045. Of course, one of the biggest challenges is finding political consensus on an issue that really shouldn’t be partisan at all,” says Bookham.
“On the business front, with so many businesses and entrepreneurs who depend on either sustainable and renewable resources, be it fisheries, forestry or agriculture, for example, or who depend on a clean and distinctive environment and dependable seasons like tourism, the ski industry, and the boat-building and marine sectors, there appears to be a general embrace on the need to be in the vanguard of dealing with climate change.”
Portland, the largest community on Maine’s waterfront. JONAA@Justin Levesque
Reinsurance becomes more and more costly
“I could be glib and just say ‘we are paying out more money’. Change is underway and is reflected in the design and engineering standards being adopted by local and state governments, architects and designers, and the construction industry. Consumers are also demanding more in terms of energy efficiency and green design, but it’s still hard to convince folks that waterfront property carries risks that may eventually outweigh the incredible views,” says Bookham.
“In terms of impact on the people and businesses we insure of climate change, I can give a few examples. The size, intensity, and frequency of hurricanes along the US east coast is causing marine insurers to take a hard look not just at premium, but what they are prepared to cover in terms of navigation limits and when in the year a boat can be in certain parts of the ocean. For a state steeped in recreational- and commercial boat building as well as a place with more than its fair share of sailors, mariners, and fishermen, this has real impacts, both for recreation and work.”
We’ve seen unusually wet and heavy late season snow collapse barns and kill livestock, and the 100-year flood standard breached with increasing frequency. Our colleagues in the health insurance sector are also tracking increases in tick- and other insect-borne diseases like Lyme that previously reached their maximum range well to the south of Maine.
“The challenges extend outside the private sector and into the realm of government sponsored insurance programs, like crop insurance or the US Flood Insurance program, where government either provides subsidies or set the pricing for policies. The reasoning for this from a public policy standpoint was originally sound (if antithetical to a market driven approach to risk assessment) as there is a public interest in helping farmers and communities avoid debilitating financial disaster. The problem is that over time the values insured have continued to climb and especially with the flood program we are in effect subsidizing dubious choices around coastal development at just the time in our history when storms and flooding are increasing in both intensity and frequency due to climate change. At some point this model will no longer be fiscally sustainable, and I fear that point is coming sooner rather than later.”
Halfway Rock lighthouse. JONAA©David Wright
Never let the ‘new normal’ feel normal
“The most important issue to address is latent complacency. As outright climate change deniers are a minority of a minority, if most people accept the climate is changing there needs to be more of a sense of urgency, even if we don’t agree as to the causes of the change,” says Bookham. “Then as for what’s already in train, changing building codes, alternative risk financing like disaster bonds, and the increasing use of discounts and incentives by insurers to reward customers who build climate resiliency into their buildings and businesses all show us a way forward.”
Where do the biggest challenges lie?
“When it comes to what needs to be done, there are so many things, but I’ll limit myself to two. The first is to get a handle on the science. This will allow communities and the insurance industry to at least attempt to plan for both the increased frequency and severity of climate-driven events. The second is to never let the ‘new normal’ feel normal. Familiarity breeds contempt, and we are a famously adaptable species. We can’t lull ourselves into thinking that climate change is just the way things are now.”
“When it comes to communities it’s a combination of complacency - the ‘it couldn’t happen here’ fallacy -, government inaction, and a rapidly increasing feedback loop of climate change driven challenges that end up overwhelming our existing means of addressing problems. Communities also have to take climate threats seriously into all their future decisions and at the same time look back on existing infrastructure and practices, maintenance and services and see where changes need to be made to what already exists or is in practice,” says Bookham.
“I’d say the challenges are the same for businesses as they are for the communities they call home. If you add in supply chain disruption, increasing insurance premiums, potential threats to raw materials and harvest yields, you have some truly existential threats.”
We have discussed the role of your industry and government in preparing to face the impact of climate change, work to mitigate those effects, as well as to try to turn the ship around - but what about the people of Maine in general?
“It is important to note that private citizens have a role to play here too. ‘Make smart choices around lifestyle’ seems like a straightforward enough recommendation, but it’s going to mean foregoing that beach house, or the big truck, the overseas vacation, and so on. Perhaps accepting that one can’t live a full-on 21st century suburban high-consumption on-demand lifestyle in a rural area like Maine is going to be the hardest thing of all, even more so than changing planning rules, installing electric vehicle chargers, and other laudable public policy changes that are underway.”
Finally, what does this all mean in figures for a small state like Maine, its people and businesses?
“Saving the stats question until last is a cruel trick to play on your readers!” jokes Bookham. “There are so many numbers and statistics we could delve into that would demonstrate the huge risks posed by climate change to my home state, but I think the numbers associated with our most iconic fishery will suffice”.
In Maine in 2018 the lobster industry landed 119 million pounds of lobster, a catch valued at $438 million at the dock, which in turn feeds a supply chain industry that generates over $1 billion in additional revenue and employs over 4,000 people. This is the largest lobster fishery in the US, supplying over 90% of all lobster caught in US waters, and its health and vibrancy directly impacts the survival of scores of coastal communities. Lobstermen, the gender-neutral term we use in Maine, are contending with a rapidly warming Gulf of Maine which is driving lobster populations north.
“Twenty years ago, the epicenter of the fishery was my home of Rockland, but now the largest landings are 30 miles to the northeast in Stonington, and still the lobsters keep moving. We have already seen a precedent for a species just leaving a geographic area due to climate change, as the Gulf of Maine no longer supports a commercial shrimp fishery: the shrimp populations now live in the waters off Canada and Greenland in larger numbers than ever before but have been denuded in the Gulf. The change in lobster numbers, location, and concentration in the Gulf of Maine could continue to be slow and steady or the rapidly warming waters could see the introduction of a predator, parasite, disease, or conditions that cause a collapse in numbers. Either way, as of now, you can’t insure against that,” says Daniel Bookham. ▢
Vilborg Einarsdottir is the Editor-in-Chief of JONAA, the Journal of the North Atlantic & Arctic and a JONAA partner & founder. Formally a journalist for 12 years at Morgunblaðið in Iceland, she has worked since 1996 as a specialised producer of film, photography and media productions on extreme locations in Arctic Greenland and as a cultural producer in the Nordic-Arctic region. She is an awarded film and documentary scriptwriter, experienced project manager and editor of photography books from the Arctic.
