How Climate Change Is Affecting Multifamily Risk Management
As more areas are experiencing natural disasters, insurers and developers are taking note.
“Oh, no,” I thought as I looked out my window the other day. Snow was coming down—harder than it had been when I was walking my dog earlier. And it was sticking.
This could mean a snow day the next day, which would mean my first grader and third grader home with me. I had a lot of work and meetings on my calendar. But that also meant hot cocoa with them in their Anna and Elsa pjs, snow angels during the day, and baking brownies and watching movies in the evening (practically requirements in my house growing up during snow days). It would be a little hectic, sure. But also, fun!
The next morning, we all woke up…and, even though it was the dead of winter, it was like a beautiful spring day out. The grass was green, the sky was blue, and after the kids got to school and I started work, I looked out my window, and there was a hummingbird.
This is not normal for this time of year in New Jersey, where I live. In fact, the state is experiencing record-high temperatures for the season.
Climate change strikes again.
Of course, I know I’m lucky. Warmer winter temperatures and no snow days? Not ideal. But there are areas across the country—and world—that are experiencing climate-related disasters, such as flooding, fires and draught.
The multifamily industry is of course also affected by climate change, and insurers are watching and increasing premiums after disasters. According to reporting by John Salustri in “Extreme Weather’s Influence on Multifamily Insurance Costs,” in 2020, U.S. climate-related damages equaled $95 billion. Because of this many carriers are exiting states where they feel the risk is greater than the reward.
Developers need to be cognizant of surroundings and make sure the building materials reflect them—for example, reinforcing walls in high-wind areas or not using only wood in an area prone to fires.
“For those in hotbeds of catastrophic perils, it’s going to be a rough year,” Chip Stuart, executive vice president, chief sales officer & North American practice leader at Hub Real Estate Specialties told Salustri. “You want to show your underwriters that you’re best-in-class.”