OCTOBER 2021 -- At Liberty Mutual, we have a unique, front-row seat to extreme weather situations caused by climate change and the profound effect it has on our policyholders. When extreme weather causes damage and upends lives, communities, and businesses, we make good on our promise of protection for the unexpected, delivered with care.

The insurance sector also plays an important societal role in addressing climate change through our risk management, underwriting, and investment practices. In addition to emissions reductions, given the increasing amount of natural disasters like Hurricane Ida, we need new approaches to mitigate the impacts of climate change and build more resilient communities.

We sat down with Dr. Kelly Hereid, Director of Catastrophe Research and Development at Liberty Mutual to discuss the role that the insurance industry plays in serving as climate translators using the latest science to make near- and long-term business decisions to protect our communities.

What is your role at Liberty Mutual and how are you using your climate science background while working in the insurance industry?

My background in climate science puts me in a unique position to understand how climate change is going to affect the broader industry. As part of the catastrophe R&D team, I like to think of our roles as a “climate translator,” where we examine the constantly evolving scientific literature and view it through a business lens to better predict how, when and where climate change will affect operations.

However, the science for all of these events is at varying stages of maturity. By also helping to advance climate analytics, which localizes and highlights the key impacts of climate change for individuals and communities, we can make sure that Liberty Mutual is on strong financial footing and adapt our products and services so our customers can prepare for the risks of tomorrow, too.

From your perspective, what role does the insurance industry play in preparing communities for climate change?

This is something that Liberty Mutual has been thinking about for a while now. We take our role as risk advisors seriously. We’re currently seeing the effects of decades of underinvestment in infrastructure that didn’t properly account for inevitable damages, and communities are facing risks related to climate change that they aren’t fortified against. This is important because often, the most vulnerable communities are the most affected by climate change and simultaneously have the least access to resources.

We’re working to providing more education on the need for climate resiliency investments to protect our policyholders, businesses, and communities for the future.

Can you expand on this concept of resilience? What does it look like in real-life?

After Hurricane Katrina in 2005, the government invested in fortifying the Louisiana levee system, and in the face of Hurricane Ida, 16 years later, the infrastructure did exactly what it was supposed to do – prevented extreme storm surge flooding where that investment had been made. At the same time, much of the U.S. Northeast infrastructure was not fortified against the impacts of the likes of Hurricane Ida. Sadly, a number of people in the Northeast lost their lives sheltering from the storm because urban drainage systems were unable to withstand the intense flash floods, and physical damage is likely to extend into the billions of dollars.

As the Hurricane Ida examples shows, while there has been an investment in resilience it isn’t consistent across the board and can differ from region to region and community to community – usually depending on where an event has occurred in the recent past. However, hurricanes are just one example of a weather-related risk that isn’t going away. We need physical infrastructure that can withstand the impacts of climate change and also protect those caught in a storm and unable to evacuate – whether that’s from storm surges and precipitation or extreme heat and freezes.

What does climate resilience mean for the insurance industry?

The insurance industry must proactively strengthen the resilience of our communities today to ensure affordability and accessibility of insurance in the future.

That’s why at Liberty Mutual, we’re advocating to strengthen our physical infrastructure and educate customers and stakeholders about the climate impacts we know are coming in the future. We’re very committed to prioritizing availability, accessibility, and affordability for insurance for our customers and see it as the key role of insurance in a sustainable economy.

What’s next for climate risk mitigation?

We must pair emissions reduction with climate change mitigation efforts to increase resiliency. Because even if we stopped emitting any carbon into the atmosphere starting tomorrow, there is a certain amount of climate-related risk that is already baked in for decades or centuries, and as a society we will have to adapt. Much of our existing infrastructure just isn’t fortified against the number of climate-related disasters that are already a reality for much of our communities.

But the insurance industry can’t do this alone – we need a shared sense of responsibility between public and private sector partnerships: governments, businesses, innovators, communities, and more. This as an important turning point and I am excited to see the insurance industry playing an important role in these discussions.

To hear more about the importance of climate resilience in a build environment from Dr. Kelly Hereid, check out the Verge ’21 panel discussion.

At Liberty Mutual, we are committed to supporting climate resiliency and a low-carbon economy through our risk management, underwriting, and investment practices. Learn more here about our sustainability approach. 


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