Natural Infrastructure Helps Prevent Natural Catastrophe Damage. Here’s 3 Ways Insurers Can Take Advantage
When a natural catastrophe strikes, the physical and economic damage to a community is undeniable.
Roads flood, businesses face prolonged closures and insurance gets called in to help cover losses. In 2019, natural disasters cost $137 billion in economic losses, only about $52 billion of which were covered by insurance.
Typically, when humans want to protect themselves from weather and climate related hazards, they build new infrastructure. Dams and levees help protect against flooding. Seawalls and bulkheads are built to protect against hurricanes, tsunamis and other tropical storms.
These structures, however, can weaken or break, causing their own waves of destruction and bring about other risks.
So while traditional infrastructure may have become the default solution to protect humans from weather and climate-related hazards, a growing body of scientific studies have found that natural resources, such as wetlands, coral reefs, floodplains and forests, can all be used to reduce risk.
“There’s actually an enormous and constantly growing body of science on this very topic, examining how natural systems perform to protect communities in the face of increasingly frequent weather and climate related events,” said Jessie Ritter, director of water resources and coastal policy at the National Wildlife Federation.
Dubbed “natural infrastructure,” these resources are proving to be an effective risk reduction tool in the fight against climate change.
To better understand how physical features like wetlands or coral reefs could be used to reduce the risks posed by natural catastrophes, the National Wildlife Federation partnered with Allied World to compile case studies, scientific research and analysis that demonstrate the effectiveness of natural infrastructure.
“We were hearing about the hunger for more science and more examples,” Ritter said.
The report that Allied World and NWF partnered on, titled “The Protective Value of Nature: A Review of the Effectiveness of Natural Infrastructure for Hazard Risk Reduction,” highlights four different types of natural catastrophes — inland flooding, coastal hazards, extreme heat and drought, and wildfires — and makes recommendations on how natural infrastructure can be used to reduce the risks brought on by these events.
“What we really wanted to do in pulling this report together was to dig into the research and then compile and summarize all of the latest studies on the performance of natural features, so that they could all be housed in one, convenient place for decision makers or other stakeholders who are interested in learning more about their effectiveness,” Ritter said.
What Is Natural Infrastructure?
Broadly speaking, natural infrastructure is a way to describe the earth’s natural physical features which are able to protect communities from weather and climate related hazards, according to Ritter.
“By the term ‘natural infrastructure,’ we are referring to natural systems — wetlands, forests, coral reefs, healthy dunes — that provide important services and benefits to society, ranging from things like flood protection and erosion control to other services like water quality purification or recreational and aesthetic values to communities,” she said.
For example, features like wetlands, which are highly absorptive, can help prevent flooding in downstream communities by holding water.
“They act like nature sponges, soaking in and holding water so that they reduce stress on the levees or prevent flooding in downstream communities,” Ritter explained.
Other features, such as coral reefs, can attenuate wave energy, thereby causing smaller waves to strike shore during hurricanes and tropical storms. Studies from around the world have found that coastal habitats can reduce wave heights by anywhere from 35% to 71%.
How Effective Is It?
The report research shows natural infrastructure can be just as effective as dams, bulkheads and other man-made solutions.
In some cases, natural features were even more effective at preventing damage.
One analysis of the 88 tropical storms and hurricanes that have hit the U.S. between 1965 and 2016 found that places with more wetlands sustained significantly less property damage than areas with little to no wetlands.
Another study noted that preserved wetlands and floodplains near Middlebury, Vermont reduced the damage from Tropical Storm Irene by 84% to 95%. Yearly, they provide between $126,000 and $450,000 in annual flood mitigation services.
“Natural features can provide significant protection to communities from natural hazards and are often just as effective if not more effective than traditional structural infrastructure at reducing hazard risk,” Ritter said.
Natural infrastructure isn’t just effective; it can also be much cheaper than taking on traditional infrastructure projects. Unlike man-made infrastructure, natural features don’t require nearly as much in maintenance and repair costs. America’s dams are currently running a $70 billion bill in needed repairs, making the natural, low-maintenance solutions look all the more attractive.
“Our nation’s infrastructure, in many cases, is very old,” Ritter said.
“We’re at a point where infrastructure in many parts of the country, whether we’re talking about our water infrastructure or surface transportation infrastructure, is in great need of an update.”
Updating such infrastructure can be cost effective as well: A Massachusetts project to remove three old dams and restore floodplains in those areas was 60% less expensive than repair and maintenance would have been over the next 30 years.
3 Steps to Increase Natural Infrastructure Development
1) Protect and restore: One of the best ways to increase natural infrastructure development is to protect and restore the resources that are already there.
“A lot of times the most effective hazard risk reduction comes in the form of undisturbed and healthy natural systems,” Ritter said.
“Many of our intact ecosystems around the country continue to face pressure from population growth and from development from other destructive land and water resource management practices.”
Identifying where wetlands, floodplains and other forms of natural infrastructure are and lobbying local governments to protect and restore them can help communities take advantage of the resources right in their backyards.
2) Make natural infrastructure mainstream: Natural infrastructure projects aren’t as common as traditional, man-made solutions to climate risks, largely because many people go straight to building a dam or seawall when they think about containing floods or hurricane waters.
“A lot of times when we’re designing flood protection projects, we default to building a higher levy, or we default to some hard piece of infrastructure to protect us from flooding,” Ritter said.
“Less frequently do communities consider things like levee setbacks, giving rivers more room to spread out in the actual floodplain and taking some of the stress and the pressure off of these systems.”
In order to address this problem, natural infrastructure projects must gain more mainstream acceptance — a task the insurance industry can help with.
“Natural features can provide significant protection to communities from natural hazards and are often just as effective if not more effective than traditional structural infrastructure at reducing hazard risk.” —Jessie Ritter, director of water resources and coastal policy, National Wildlife Federation
Insurance companies can help increase the use of natural infrastructure for community protection by encouraging clients to restore natural features as a risk reduction tool.
Insurance can also help by encouraging governments to support natural infrastructure projects when they are involved in policy discussions. On June 29, for example, Allied World and the Natural Wildlife Federation held a virtual briefing on the report for Capitol Hill staffers.
“Allied World’s commitment to this issue and to elevating the importance of natural defenses is really making a significant difference in our ability to get these new policy proposals realized,” Ritter said.
3) Improved risk assessment: Recognizing natural infrastructure as a risk reduction tool and assigning risk-based rates based on its effectiveness is the easiest area for the insurance industry to step up when it comes to protecting these natural resources.
“Industry support for making sure that these solutions are part of the toolbox and are getting properly credited when we talk and when we think about how we assign risk-based rates — that would be really valuable,” Ritter said.
Mapping where these features are and modelling their effectiveness at reducing risk is another area where the industry could step up, according to the report.
“It would be wonderful if we could move toward a scenario where we’re actually able to map these features and account for, or estimate for, their risk reduction benefits to communities,” Ritter said.
Obviously, not every enterprise will have the resources to take on hefty modelling and restoration projects, but even just recognizing the valuable role nature plays in reducing weather and climate related hazards is a start.
“Nature is an under-utilized solution for hazard risk reduction in the U.S., but there are things we can do to start changing that,” Ritter said. &