Climate change is nothing new to the real estate and property industry. Insurance companies and regulators are two bodies aware of the increasing risks that wind, hail, tornadoes, and flooding are imposing on properties and homes.
However, what is new is that researchers are warning that the data used to measure these risks is inaccurate. Weather-related events and climate change are occurring at such a rate that the information is filtering through too slowly. The processes used to report current climate data are still evolving, and some are concerned that this could contribute to a potential housing bubble.
Investor Concerns May Put Pressure on Developers
Despite concerns with climate change, property developers are not yet feeling the effects of purse-tightening from their investor groups and are plowing ahead with new construction while regulators are requiring changes to address climate risks.
In South Florida, the Washington Post reports that cities have adopted stronger building codes and require developers to use building materials that can withstand high winds. Officials in Miami are focused on elevating roads and homes to protect them from rising sea levels, and they are using incentives to encourage inland development, away from low-lying areas.
According to the New York Times, city officials in Charleston, South Carolina, are planning for flooding events due to climate change by building a $1.1 billion sea wall and introducing a zoning law that prohibits property development in the city’s low areas where flooding could occur. Charleston’s city population grew 25 percent from 2010 to 2020, and development in recent years has included almost 14,000 multifamily apartments.
But while regulators are reacting to climate change, developers are soldiering on with projects while they still can. In Boston and South Florida, construction in these areas continues to boom despite climate change warnings from the National Oceanic and Atmospheric Administration and the United Nations Intergovernmental Panel on Climate Change.
All this development requires that investors and homeowners are protected, but the insurance companies are finding it increasingly difficult to assess the risks amidst rapid climate change.
Insurance Companies Are In a Bind
Insurance companies bear the brunt of the fallout from climate change and weather events. They must accurately assess the risks so that homeowners and property owners are not left overexposed. However, recent findings show that insurance companies are behind the curve when it comes to accurately assessing current risks, and their methods for doing so are still nascent. Insurers lack established standards, and different analytics firms use different maps and methodologies for comparisons.
Federal Scientists Are Jumping In
FEMA has the most reliable data for flood risk and is the go-to for real estate and property companies. The maps can be inaccurate because of the time it takes to update maps, conduct surveys, and complete damage assessments. Thankfully, scientists at two other federal science agencies, the National Oceanic and Atmospheric Administration (NOAA) and the National Science Foundation (NSF), are creating a research center that is working on providing better climate change data to the insurance industry.
This will help property owners and companies understand the real risks and what type and amount of insurance they really need. According to NPR quoting Roy Wright, who leads the Insurance Institute for Business and Home Safety, “What we knew about rain and wind and wildfire in 1990, and what we knew in 2010, is useful information, but it’s insufficient to understand the risks that befall us come 2025, come 2030 …NOAA, and the data they provide, is some of the most powerful data available anywhere in the world.”
The new research center will make detailed federal climate data available to insurance companies so they can use climate science to look into the future. Historically, climate data has looked at historical data, and insurance companies have based their products on data that doesn’t integrate recently recorded changes in climate.
The National Science Foundation will choose one or more universities to lead the center, and academic researchers, graduate students, and federal scientists will work with insurers and reinsurers to make scientific information about climate change accessible to insurance companies and data providers.
New Data for Insurers
ATTOM Data is working to make sure insurers, brokers, and investors can access the most up-to-date climate risk data. Data providers like ATTOM provide flood hazard and flood zone data sourced from the latest government resources. ATTOM makes sure that whatever reliable data scientists provide and distribute is the data the platform delivers to its customers.
Currently, ATTOM’s data are created from a series of spatial analyses carried out from publicly available U.S. Geological Survey data. With ATTOM’s flood hazard data maps and wind, hail, and hurricane indexes, private and public planners can make better development decisions, well-informed property owners can purchase adequate insurance, and insurance providers can better judge their reinsurance needs.
Why Climate Data is Imperative
The implications of a housing bubble in coastal regions due to inaccurate climate data are starting to dawn on property developers and investors, but homeowners are still largely unaware of their risks. It’s up to real estate agents and insurance companies to ensure that homeowners and property owners are not left over-exposed by delivering the latest data on climate risk.
Both public and private companies are having to pay attention. In March 2023, the Securities and Exchange Commission proposed a rule requiring public companies to disclose their climate-related risks. It’s only a matter of time before the private sector will also be affected, particularly if a housing bubble is the result of inaccurate climate data.
ATTOM offers the latest climate-change risk data to ensure you are never at a disadvantage. Contact an ATTOM representative today!
