During the darkest days of Hurricane Sandy, when half of Manhattan was literally in darkness, my family watched with horror as homes and businesses were destroyed, lives were ended prematurely, and the city we call home was brought to its knees. But in the aftermath of the storm, few took time to consider who would pay for individual families and business to rebuild. Property and Casualty (P&C) insurers provide familiar services like car and home insurance, as well as other liability insurance, and represent a critical component of the financial landscape. And as extreme weather events, like hurricanes, wildfires, floods and tornadoes increase in frequency as the planet warms, P&C insurers must grapple with how this changes both their operations and their business model. They stand at the crossroads of this global catastrophe, in both insuring carbon-intensive assets and activities, and paying claims for climate change-related damages.
The Allstate Corporation is the largest publicly-held personal lines insurer in the United States, and their P&C segments actively manage the risks related to climate change from a number of angles. In managing their products and services, Allstate views the greatest risks to be related to the “increase in the frequency and severity of auto and property claims when severe weather conditions occur… [particularly] due to hurricanes [in] major metropolitan centers… along the eastern and gulf coasts of the United States.” These losses (for Allstate alone) have historically included $3.6bn in 2005 related to Hurricane Katrina and $2.3bn in 1992 related to Hurricane Andrew. These sorts of catastrophic events are difficult to predict, both in frequency and severity, and a shifting climate makes these estimates even more challenging. Additionally, though Allstate has a lower direct environmental impact than much of the Fortune 100 (as it does not process large volumes of raw materials, operate large factories or maintain large fleets of vehicles), its operations are subject to changes in internal and external demand for sustainable practices.
Allstate has incorporated a number of practices and programs into its operations and business model in order to appropriately react to these changes. In their regular-way business, Allstate purchases reinsurance (i.e. insurance for insurers) to cover significant hurricane- and wind-related losses, limits the writing and renewal of new policies in hurricane-prone coastal areas, implements tropical cyclone deductibles in newly written policies, and participates in state-level insurer facilities, such as the California Earthquake Authority and the Florida Hurricane Catastrophe Fund, which reimburse insurers for losses. The company also actively incorporates the shifting external and internal risk environment into its pricing models. While each of these actions mitigates Allstate’s risk from the effects of climate change, the company also works to mitigate the causes of climate change across the company, its clients and the broader world. In its operations, Allstate has targeted the reduction of 2010 energy use levels by 20% by 2020, driven by the Allstate Sustainability Council, LEED-Certified buildings and consumer programs such as online bill paying. Allstate partners with outside organizations, such the Institute for Business and Home Safety (IBHS) to advocate for stronger and better enforced building codes. Allstate also works to influence the behavior of its customers to greener outcomes, including the Homeowners Policy Green Improvement Reimbursement Endorsement, which pays customers to replace appliances in their home with Energy Star-approved items.
Through these actions and other internal programs, Allstate has worked to manage the risk of the shifting landscape for P&C insurers, however there are additional opportunities to influence the behavior of customers and provide new products and services, to both mitigate and capitalize on the effects of climate change. Though Allstate works with IBHS to advocate for more resilient building codes, it could use its reach and pricing structure to educate homeowners on fortifying their homes and incentivize them relocate to less disaster-prone zones. In addition, Allstate could provide premium discounts for low-emission vehicles and drivers who spend less time on the road, decreasing overall emissions. There are also a number of government or public works programs that would help to manage the effects of climate change and mitigate Allstate’s customers’ risk, including the building of flood defenses for coastal cities and government-subsidized loans to cover the costs of flood and fire-related upgrades in disaster-prone areas. Allstate could also offer a suite of new products to insure against climate change-related damages, including business interruption due to flood-related brown outs, catastrophe-related unemployment, and post-event costs (like the increased costs of construction and cost of living in post-disaster areas).
In this rapidly shifting landscape, it is imperative for P&C insurers like Allstate to continue to adapt, not just to the newly arisen risks from climate change, but also to the opportunities to serve their clients better. And perhaps the next time a superstorm comes to New York City, we’ll be better prepared to handle it.
 Ross, Christina, Evan Mills and Sean B. Hecht, “Limiting Liability in the Greenhouse: Insurance Risk-Management Strategies in the Context of Global Climate-Change.” Stanford Environmental Law Journal, Vol. 26A, p. 316, 200. Via Social Science Research Network: http://ssrn.com/abstract=987942.
 Allstate Corporate Responsibility | Environment. 2016. Allstate Corporate Responsibility | Environment. [ONLINE] Available at: http://corporateresponsibility.allstate.com/environment. [Accessed 03 November 2016].
 Allstate Corporate Responsibility | Carbon Disclosure Project. 2015. Climate Change 2015 Information Request Allstate Corporation. [ONLINE] Available at: http://corporateresponsibility.allstate.com/wp-content/uploads/2016/06/ALL_CR14_CDP_2015_Climate_Change_Disclosure.pdf. [Accessed 3 November 2016].
 National Association of Insurance Commissioners. 2008. The Potential Impact of Climate Change on Insurance Regulation. [ONLINE] Available at: http://www.naic.org/documents/cipr_potential_impact_climate_change.pdf. [Accessed 3 November 2016].