LA Wildfires' Apocalyptic Cost, US National Adaptation Strategy Launch, and More

Sponsor Message

The Geospatial Risk Summit is a unique two-day event focused on how professionals in finance, insurance, supply chain, healthcare, and energy industries use geospatial data to manage physical and climate-related risks.

Join industry experts and innovators in breaking down silos, exchanging insights, and advancing our understanding of geospatial solutions for managing physical and climate risks.

Don't miss your chance to join the event on January 30, 2025, in New York City! 

Technical workshops on January 29th will see top data scientists, analysts, & engineers show off risk analytics applied to real world problems.

👉 Follow on LinkedIn

Finance:

• LA Wildfires’ US$275bn Toll

• Climate Shock Losses Exceeded US$300bn in 2024

Policy:

• US Debuts National Adaptation and Resilience Planning Strategy

• Adaptation Updates to EU Taxonomy 

Tech:

• Sea-Cargo Insurer Raises US$20mn from Resilience-Focused Investors

Research:

• Another round-up of papers and journal articles on all things climate adaptation

LA Wildfires’ US$275bn Toll

The Los Angeles wildfires have been raging for seven days, claiming at least 24 lives and burning an area roughly three times the size of Manhattan.

The blazes are on track to be the costliest in US history, with private forecaster AccuWeather estimating financial losses of US$250-275bn — about 7% of the annual GDP of California. 

The immediate cause of the multiple conflagrations blasting the city are yet to be determined. However, climate change makes wildfires more frequent and harder to contain. Southern California has been starved of rain in recent months, with LA itself seeing just 0.2 inches between October and January — about 4% of the 1991-2020 average. Parched vegetation is easier to ignite, and allows fires to spread faster. Fierce Santa Ana winds, causing gusts of up to 80mph, are also powering the blazes and making them harder to contain.

Current financial loss estimates are likely to be severe undercounts, according to climate scientist Katharine Hayhoe:

Most of the losses calculated so far are property-related. Analysis from geospatial data provider ICEYE indicates around 10,900 buildings have been ravaged by the fires so far, including thousands in the well-to-do Pacific Palisades neighborhood. The AccuWeather loss estimate also includes utility damage costs, business disruptions, and the financial impact of the evacuation of some 100,000 residents to date.

The multiple firestorms may prove the US insurance industry’s nemesis. Analysts at JP Morgan estimate insured losses will exceed US$20bn. This is despite a large-scale retreat by insurers from the Golden State’s risk hot spots in recent years. Around 100,000 Californians lost their insurance from 2019 through 2024, in part because of carriers pulling out due to the intolerable level of climate risks. Allstate, State Farm, and Farmers Insurance are among the major firms to have stopped doing business in the state.

Following the exodus of private insurers, many households are relying on the state’s insurer-of-last-resort, known as the FAIR Plan. However, this insurance pool may itself be overwhelmed by LA fires.

Speaking on MSNBC, Dave Jones, Director of the Climate Risk Initiative at UC Berkeley Law School and former California Insurance Commissioner, said: “Right now, the FAIR Plan says it has about US$200mn in reserves and US$2.5bn in reinsurance. The FAIR Plan exposure to losses in the Pacific Palisades alone is $5.89bn. So we very well could exceed the amount of money that they have.”

If the FAIR Plan’s capital is exhausted, an additional US$1bn could be extracted from insurance companies, and any remainder — which could be substantial — taken from policyholders themselves. Whichever way you cut it, the financial aftermath of the LA fires is set to be truly apocalyptic.

Note: An earlier version of this article erroneously stated that the FAIR Plan had US$20mn in reserves, rather than US$200mn.

Climate Shock Losses Exceeded US$300bn in 2024

Worldwide financial losses from natural disasters hit US$320bn in 2024, according to new data analysis from global reinsurer Munich Re.

Of this amount, less than half — US$140bn — were insured losses: the third-highest annual total going back to 1980. Munich Re said that 93% of overall losses and 97% of all insured losses were linked to extreme weather events last year, which are becoming more frequent and severe as the world heats up.

Billions were attributable to a handful of major hurricanes last year, particularly Hurricanes Helene and Milton — which devastated large parts of the US in September and October, respectively. Helene caused the largest overall losses from a single event last year, at US$56bn, of which US$16bn were shouldered by insurers. Milton incurred the largest insured loss of the year, at US$25bn, because of the extent of storm surge and wind damage it unleashed on Florida.

A spate of so-called “non-peak perils” also caused massive cumulative losses. Floods, wildfires, and severe thunderstorms altogether inflicted US$136bn in losses, of which US$67bn were insured. Munich Re says that while these totals were slightly below the loss figures for 2023, they exceeded the average for the past ten years. “It is striking that, from a long-term perspective, non-peak perils are increasingly fuelling the trend of rising losses, while peak risks like tropical cyclones and earthquakes continue to be a source of loss volatility,” Munich Re wrote.

The reinsurer added that it is taking steps to update and improve its risk models to capture the higher incidence and severity of extreme weather events, which should in turn allow it to continue providing risk absorbing capacity to insurers and businesses.

In Brief

The US Federal Emergency Management Agency (FEMA) announced US$1.35bn of climate resilience grants for communities facing severe weather shocks. The Building Resilient Infrastructure and Communities (BRIC) program will allocate US$750mn for protecting people and infrastructure from natural hazards, while the Flood Mitigation Assistance program is making US$600mn available for addressing flood risks. FEMA Administrator Deanne Criswell said these grants should enable transformative community-driven planning and projects that enhance safety and resilience. (FEMA)

The US Department of the Interior is investing US$121mn to help Tribal communities address severe climate-related threats, marking the largest annual funding allocation in the Bureau of Indian Affairs’ history. Funded through the Inflation Reduction Act, Bipartisan Infrastructure Law, and annual appropriations, this initiative supports 124 projects across 96 Tribes and 10 Tribal organizations, focusing on climate adaptation planning, relocation of critical infrastructure, and habitat restoration. This financing is part of a more than US$560mn investment for Tribal climate resilience programs achieved during the Biden-Harris administration. (US Department of the Interior)

US Debuts National Adaptation and Resilience Planning Strategy

The Biden Administration has published a blueprint for protecting US lives, businesses, and investments from worsening climate shocks. 

The 898-page National Adaptation and Resilience Planning Strategy, released by the State Department last Friday, brings together a wealth of data, research, and ideas on addressing climate risks to the US economy and society. The document has been submitted to the UN to fulfill the country’s obligation to produce a National Adaptation Plan (NAP) under the Paris Climate Agreement.

It is made up of four parts: a climate risk and vulnerability assessment, a planning and identification of adaptation options section, a guide to strategy implementation, and a section on monitoring, evaluation, and learning (MEL). These four parts are populated by an array of documents and reports published throughout the Biden presidency.

These include the National Climate Resilience Framework, first published in 2023, which sets out core objectives essential to hardening the US against climate risks, and the Climate Resilience Game Changers Assessment, published last July, which is a guide to channeling investment toward 28 technologies, practices, and strategies that promise to make the US better able to withstand and recover from disasters like the LA wildfires and last year’s monster hurricane season.

The document also hosts a number of federal agency climate adaptation plans, including those for the Departments of Defense, Interior, and Housing and Urban Development. Excerpts from the latest US National Climate Assessment and Biennial Transparency Report — another paper mandated under the Paris Climate Agreement — are featured, too.

While the strategy document sums up US adaptation efforts under President Biden, the authors admit that it needs more work to become a true National Adaptation Plan. They specifically call out the need for increased “vertical and horizontal integration” of climate risks and adaptation “across all sectors and levels of governance”, and the setting up of a process for “regular whole-of-government and community consultation” with vulnerable populations and Tribal Nations. The plan would also benefit from a more sophisticated MEL process — informed by the collection of metrics and data on climate risks and adaptation impacts.

The job of advancing US adaptation and resilience will soon rest with incoming President Trump, who has called climate change a “hoax” and promised to eject the country from the Paris Climate Agreement. 

Adaptation Updates to EU Taxonomy 

An EU advisory body has published recommendations for updating the bloc’s Sustainable Taxonomy, including changes meant to funnel more capital toward climate adaptation.

The 348-page report from the Platform on Sustainable Finance, which helps shape the Taxonomy, includes ideas on making climate change adaptation criteria more user-friendly, and thoughts on additional criteria for so-called “adapted” undertakings.

The Sustainable Taxonomy is used to classify activities that support the EU’s climate and environmental goals. It underpins a swathe of sustainable finance rules and frameworks set up to align investment with the bloc’s net-zero trajectory. At the end of last year, the European Commission announced plans to introduce “omnibus legislation” intended to simplify and streamline the Taxonomy, as well as the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive (CSDDD). The Platform on Sustainable Finance report may help inform planned changes to the Taxonomy.

On adaptation, the report recommends new Do-No-Significant-Harm (DNSH) criteria for “adapted” activities. The purpose of these recommendations is to ensure activities and investments intended to build climate resilience and support adaptation do not inadvertently harm other climate and nature goals.

It also floats a “Climate Change Adaptation Headline Ambition Statement”, which would set out the EU’s aspirational goal for the adaptation-focused elements of the Taxonomy.

The paper also highlights a gap in the Taxonomy when it comes to agriculture and adaptation. The report says agricultural activities are “strongly influenced by physical climate change impacts” but are not currently factored into the Taxonomy’s Adaptation Annex — the part of the Taxonomy law that describes when and how an economic activity qualifies as supporting climate adaptation.

“[T]he EU Taxonomy is incomplete for the objective of climate change adaptation — it only partially covers economic activities that offer substantial contribution to adaptation (need to be “adapted” as a priority). These are additional economic activities that need to be prioritised for the definition of the criteria for their substantial contribution to adaptation,” the report reads.

In Brief

Hawaiʻi’s Climate Advisory Team (CAT) has released a policy paper outlining immediate actions and long-term strategies to enhance the state’s disaster resilience. Key recommendations include establishing a permanent resilience office, creating a Climate Resilience Fund to support infrastructure and community projects, and securing disaster recovery funds for vulnerable residents. Governor Josh Green said the findings should motivate “bold action” on disaster resilience during the state’s 2025 legislative session. (Governor Josh Green)

Sea-Cargo Insurer Raises US$20mn from Resilience-Focused Investors

AI-powered insurance startup Parsyl has raised US$20mn to accelerate growth of its sea-cargo business. 

Parsyl focuses on insuring the food, beverage, and medicine cargoes that crisscross the world’s oceans. It leverages granular supply chain data, generative AI, and machine learning techniques to provide customers with custom policies and a streamlined claims process that support risk reduction and climate resilience.

Supply chains face more and more disruptions as climate change worsens. These shocks are especially acute for buyers and sellers of perishable commodities — goods that can turn bad if it takes too long to transport them, or if they are exposed to high temperatures. Parsyl offers tailored insurance products for these goods, and data partnerships so that suppliers can share information that can be used to lower their premiums and improve the claims process. 

Parsyl writes business in the US through a managing general underwriter and in London through a managed syndicate at Lloyd’s, a global insurance marketplace.

The Series C investment round was led by Lightsmith Group, the climate-resilience focused private equity investor, which joined existing investors HSCM Ventures, GLP Capital Partners, Lineage Ventures, and FirstTracks Ventures.

“Climate change is disrupting complex supply chains,” said Jay Koh, Managing Director of The Lightsmith Group. “Parsyl provides clients with a dynamic solution to this dynamic problem.”

In Brief

Financial data giant Moody’s announced the acquisition of CAPE Analytics, which provides AI-powered property intelligence covering climate and natural disaster risks. The tie-up will combine Moody’s catastrophe risk models with CAPE’s address-specific geospatial analytics, offering insurers, reinsurers, and financial stakeholders more precise property data, including risk assessments for extreme weather events like wildfires and hurricanes. The deal is set to close in the first quarter of this year. (Moody’s)

XOCEAN, a provider of ocean data to the offshore energy and civil hydrography sectors, has raised €115mn (US$117mn) to accelerate its global expansion and product innovation. The company runs a fleet of low-carbon Uncrewed Surface Vessels (USVs) that help support offshore wind development, carbon capture projects, and infrastructure monitoring. The funding round included S2G Ventures, Climate Investment, Morgan Stanley's 1GT fund, and an affiliate of the Crown Family's CC Industries. (XOcean)

RESEARCH

2024 is the first year to exceed 1.5°C above pre-industrial level (Copernicus EU)

Canadian forests are more conducive to high-severity fires in recent decades (Science)

Repeated global adaptation across plant species (PNAS)

Thanks for reading!

Louie Woodall
Editor