Insurers must be aware that some of the new big buildings are exposing the system capacity of cities, warned Professor Susan Roaf of the Open University in her presentation on the impact of climate change on mega-cities.
“In Los Angeles, many of the new high-rise buildings exceed the capacity of the city surroundings. There is often not enough water supply, for example, to cater to the needs of such buildings. Do the investors behind these buildings, including many insurance companies, know this?”
When it comes to the issue of buildings and the effect of Hurricane Katrina on New Orleans, Roaf said the lessons are not just about insurance payouts. “From an insurance perspective, it is not just the property collapsing and the insurance from that, but also the societal collapse. Many buildings in New Orleans are now not considered worth rebuilding and are left to just go to ruin. These are clearly bad investments.”
She added that in the UK, the government’s building policy isn’t helping. “Building 300,000 new homes on the Thamesmead Gateway is an extreme high risk, but the deputy prime minister’s office said it was an acceptable level of risk.” Said Roaf, “In 1953, there was a tragic event created by flooding that took many people’s lives in this area, yet it is suggested we still build more homes here.”
Tatiana Bosteels from the London Climate Change Agency argued, “It depends how the properties are built.” She added that her agency is working towards a major aim: making London a low carbon, sustainable city. It will generate opportunities for a potential $50bn market in new insurance products by 2025, Bosteels said.
Andrew Holt is features editor of the Insurance Times.