Combined with land subsidence caused by building on soft
soil, many global cities face losses due to flooding, investment
in very expensive flood control systems, or both.
For our purposes in this article, it is unimportant whether
melting ice is caused by burning fossil fuels, long-term fluctuations in natural climate processes, sunspot activity, or space
aliens beaming ray guns at the planet. The evidence that ice is
melting is overwhelming, and unlike other perils like tropical
cyclones, there is little question what will occur in the medium
term, or that large costs will be eventually be incurred.
Seas are rising, and trillions of dollars of property are at risk.
The only question is whether societies begin adaptation soon,
when adjustments can be spread in modest increments over
many years, or wait until calamity strikes, when economies will
be seriously disrupted by abrupt changes in activity.
(A comprehensive discussion of the evidence that ice is melting is beyond the scope of this article. Interested readers are
referred to NASA’s Earth Observatory website. 1)
Rethinking Building Codes
This article offers a specific application of concepts outlined in a
previous one this author published in Contingencies in 2014 titled
“Demographics, Development, and Disasters—Implications for
the Insurance Industry’s Role in Planning for the Future.” That article outlined reasons that current building code development and
insurance pricing practices are insufficient to ensure that an optimum level of investment in loss mitigation is made. Specifically:
■ The cost of risk transfer for a property is likely to change during its design lifetime.
■ In the case of coastal property, the cost is likely to increase
over time due to higher concentration of risk and changes in
hazard from rising sea levels.
■ The two key mechanisms that should work to encourage investments in loss mitigation on such properties—insurance
pricing and building codes—are not well suited to addressing
the issue because:
• Insurance pricing is focused on the short-term exposure to
loss due to the predominance of one-year policies, meaning
–future changes in hazard, which can increase expected
losses (e.g., rising sea levels); and
–future risk concentration, which will drive higher “risk
load” to reflect the cost of capital (e.g., growing wealth and
• Building codes generally:
–are focused on life safety;
–consider single buildings rather than the community;
–ignore macroeconomic costs and community resilience;
–reflect current conditions, not those that may affect the
building during its design lifetime.
The way building codes are currently developed compounds
the problem with a change in hazard due to rising sea levels, because the assumed resistance to loss may not work as intended.
Aerial views during an Army search and rescue mission show damage
from Hurricane Sandy to the New Jersey coast, Oct. 30, 2012.
Rising Tides CONTINUED