The forgotten peril

The property insurance and risk management world are focusing heavily on #naturalhazards. This is nothing new. In fact, property insurers have addressed natural hazards for decades, assessing risks, providing capacity and adjusting losses caused by events such as as wind, flood, earthquake, hail, freeze, and lightening.

What's changed now is that the industry needs to look at these perils through the ESG lens, focusing on how to protect organizations against the effect of #climatechange, support them in their efforts to decarbonize their operations and assist them in their duty to disclose the financial impact of #climatechange on their business. The increased focus on climate change has shifted the whole narrative and marketing messaging from "natural hazards" to "climate risks". I have recently attended the FERMA risk management conference in Copenhagen and I could see "climate risks" being mentioned in pretty much all the stand advertising, publications and presentations around the venue.

One of the interesting angles going through the transition from a narrative of natural hazards to one of climate risks is how earthquake is now handled. I can report that at FERMA the earthquake risk seemed to have totally disappeared from the scene!

The climate risks debate arena is now dominated by airborne and waterborne hazards and earthquake is definitely no longer a focus. After all, shaking ground is not linked to thinks like climate or weather. Or is it?

I have done some research and I'd like to share some interesting views on this:

DIRECT LINKS WITH CLIMATE CHANGE

There are studies that establish a link between melting glaciers and thermal expansion of oceans from climate change to earthquake-related hazards. For example, rising seas are raising the water table in many places of the world, which can translate to an increased tendency for liquefaction during earthquakes. Also, prolonged period of drought can determine stress loads on Earth's crust.

I find this article from NASA particularly interesting:

URBANISATION AND DEMOGRAPHIC SHIFTS

Another, indirect link and definitely one that is real, and not just theory, is created by the demographic trends caused by climate change, whereby population is expected to relocate to coastal areas in the next few decades and centuries due to water scarcity and droughts. Those areas tends to correspond to areas of higher seismic activity, as coasts often follow the contours of underlying continental plaques moving relatively to each other. Therefore human lives, property and businesses will be more and more exposed to earthquakes and earthquake-triggered tsunamis as a result of these shifts, in turn caused by climate change.

NOT ALL EARTH MOVEMENTS ARE QUAKES

If we think about earth movement more in general rather than just quakes, it's easy to see the link between climate related phenomena like deforestation, drought, ice melting and soil erosion (from extreme precipitation and wind), with risk events like sinkholes, subsidence, avalanches and landslides. And I guess - pure speculation from me - even human activities such as fracking, which we can associate to the energy changes and therefore to climate change, have been associated to localized seismic events.

THEREFORE...

Focusing on climate risks today is certainly necessary if not overdue, as it's a matter of life or death for the world as we know it. The work that the insurance and risk management industry are doing to find ways to support transition and protect businesses is equally essential. However, the way some natural hazards are interlinked is not obvious and we need to constantly remind ourselves that we are part of a huge ecosystem, in which different factors cannot change without having repercussions on the rest of the environment.

Risks don't work in silos, so let's not forget that there is still a big old risk lurking right below us that we may not have fully understood yet.

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On October 10th, property insurer FM Global has launched a suite of #climateresilience products for their clients and partners, some of which are accessible to the wider risk management community. The list of products includes:

• Climate Risk Report and Climate Risk Reporting Aid
• Resilience Index
• Climate risk mapping
• Engineering Data Sheets
• <FM> Approved products and systems
• Resilience Credit

Check www.climateresilience.com if you want to know more about each of these tools.

FM Global has recently released a global earthquake map that consider not only the intensity of seismic events in the various regions of the world, but also the conditions and type of soil. This is because earthquake of a certain magnitude can cause a different degree of damage to buildings or equipment depending on whether such buildings and equipment are built on rock, chalk, sand or other geological substrate. The FM Global Earthquake Map is available in the same link provided above.

Also, seismic risk exposure is still one of the drivers of risk quality in the 2022 FM Global Resilience Index (www.fmglobal.com/research-and-resources/tools-and-resources/resilienceindex).

Earth movement remains firmly a business risk we gather data, offer advice and develop solutions for.