At E2Tech-Roux panel, insurance industry grapples with damage claims related to climate of 'surprises'

File Photo / Courtesy Town of Stonington Fifield Point Road in Stonington saw severe flooding in January 2024.

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As the intersection between climate change and the insurance industry rapidly unfolds, data collection and predictive modeling tools could provide a better understanding not only of when that next big storm is coming but what properties are most at risk.

“There is a lot of interesting new technology coming in” that can help inform current and future risk, said Blaine Grimes of Ocean House Consulting, a “blue economy” business support company in Cape Elizabeth.

Grimes took part in a panel last week on “Startups & Climate Risk: How Insurance is Evolving and What You Can Do About It,” hosted by E2Tech and the Roux Institute in Portland.

Grimes and Dan Bookham of Allen Insurance discussed how climate change is reshaping the insurance landscape, the increasing challenges of coverage in a volatile world and how startups can assess and manage their insurance needs.

Data and innovation are transforming the industry and creating new opportunities for startups that are looking to safeguard their assets and strengthen their risk management strategy, Grimes and Bookham said.

Grimes referred to “living in a climate of surprising surprises,” citing a phrase coined by a colleague, Andrew Pershing, who was chief scientist at the Gulf of Research Institute at the time.

“Environmentally, we’re seeing large events that are affecting us all and they’re larger a more surprising than we expected,” Grimes said.

During two “decadal-level” storms last year, coastal businesses and organizations found their facilities inundated.

“There are an untold number of examples of people having problems just in the last couple of years,” she said.

Grimes noted that technology solutions include “climate-smart” house purchasing software that help define a property’s risks.

Climate risks are affecting accessibility to insurance, both said.

“I’m seeing insurance companies pull back,” increase insurance costs or, in some cases, deny insurance,” said Grimes. “If you’re a larger company and you have assets on the water and need to understand better not just today’s risk, but future risk, interesting technology is coming along.”

That includes predictive modeling and ocean data collection tools, she said.

Bookham noted that, until recently, predictive modeling wasn’t allowed in California to map fire risk as a tool to price insurance.

That contributed to insurers leaving the state, he said.

Climate adaptive policies at the state level are also an important tool, he said.

“It’s a confluence of human inputs, ontological inputs, that is driving risks to levels that are becoming unsustainable and extremely expensive,” he said. “If we don’t arrest some of these things, I don’t want to think about how expensive it’s going to become.”

But more data doesn’t necessarily mean more access to insurance, said Bookham. Instead, insurance companies could leave markets because there’s too much exposure or risk.

Grimes noted there are improvements to be made in technology, innovation and data science.

“Some companies are coming in to try to integrate the data,” she said. That could in turn help coastal operations such as aquaculture businesses to understand, for example, when a storm is coming, what they need to do to prepare and how long they have.

Likewise, she said, insurance underwriters can use the data to quantity and qualify their insurance products.

“I think AI will be a component of that, as we have massive data sets,” she said.

She continued, “We can’t rely on what we knew before. Because of climate change, we have to anticipate what might happen rather than rely on historic information.”