The human and workplace cost of climate catastrophes

With the beginning of summer top of mind for the northern hemisphere, June also marks the start of a six-month long hurricane season in the Atlantic Ocean. The increasing impact of severe weather events is being felt globally due to higher exposure of natural disasters in vulnerable populations and changes in weather patterns as a result of climate change. Hurricanes are leading the pack when it comes to financial losses as damages continue to mount; according to professional services firm Aon’s 2023 Weather, Climate and Catastrophe Insight, economic losses from hurricanes has increased to $340 billion, with Hurricane Ian responsible for 30% of this global loss.

The potential impact of climate change on the frequency and severity of hurricanes makes understanding and preparing for these events even more relevant. As air and ocean temperatures rise, the behavior of hurricanes is also changing, coupled with more people and assets at risk from damage from strong winds, storm surge and heavy rain. Data from the National Centers for Environmental Information demonstrates increases not only in hurricanes but also the number of other costly natural disasters. In this light, brokers and business leaders need to be well aware of the increasing costs these extreme weather events pose across more than just the physical facets of their business.

Losses are more than just monetary, impacting the health and wellbeing of workers in affected areas. Intensifying weather events put a strain on the workforce with potential physical and mental health impacts; from injuries and health complications to stress and anxiety associated with the inability to work, or concerns over protecting the health and wellbeing of family members. Supporting a resilient workforce requires organizations, especially those that have a national or global presence, to realize the impacts brought on by localized natural disasters.

The impact on environmental conditions from severe weather events are affecting the lives that benefit plans are designed to support. Aon’s research revealed approximately 31,300 people lost their lives due to global natural catastrophe events in 2022, with more than 19,000 heat-related deaths in Europe alone. Aon’s data shows a steadily increasing death toll from heatwaves, which does not necessarily impact physical assets but can significantly impact people. Climate change also impacts health in less obvious ways including increases in respiratory and cardiovascular illnesses due to air pollution, compounded by extreme heat and the spread of infectious diseases due to changing environmental conditions. Employers and benefits providers should also be aware that climate change consequences can worsen stress and mental health conditions, leaving workers facing internal battles as well.

Displacement, whether forced or voluntary, affects an employee’s ability to work effectively. Natural disasters drove more than 30 million displacements in 2020 alone. Employers must familiarize themselves and prepare well in advance of a natural disaster to better understand the challenges that the workforce, especially those who are more vulnerable based on their demographic factors, can face in the wake of environmental crisis. Workers in regions more susceptible to severe weather events can be considered vulnerable as well as older adults, lower income workers and those with disabilities or existing health conditions. Employers are increasingly shifting their focus to look at how climate-related events can impact workforce resilience and agility plans. This has a direct effect on workforce productivity and profitability, as a workforce that suffers from the impact of natural disasters or environmentally-induced health issues can translate to absenteeism, disruption to supply chains, loss of productivity and lower engagement.

Organizations have the power to prepare to become more resilient before disaster strikes. Conducting research and leveraging the latest technology can put employers, and insurers, a step ahead by modeling potential for volatility in order to be proactive with employee resources and offerings. As climate change took its place as a top 10 priority for executive leaders in Aon’s 2022 Executive Risk Survey, organizations are looking toward building a resilient workforce by proactively examining the holistic needs of their employees before disasters occur.

One example of the ways companies can support their workforce and increase resiliency is through location analytics. Location analytics can help ensure workers displaced from climate-related natural disasters are protected and safe and can continue to be effective employees. By assessing location intelligence, fair and accurate decision making can guide outcomes for businesses and their teams. Organizations can create contingency plans for remote work, flexible time off and even additional benefits to help affected employees be more resilient to the struggles they may face. By proactively addressing these issues with employees, companies can also alleviate stress created from previously unknown or unclear factors like working conditions, availability, or access to care and appropriate insurance coverage.

The organizations that navigate this volatility and build a more resilient workforce share several attributes and take a holistic approach to understanding company and employee needs. First and foremost is the provision and offset of costs for health benefits. According to the World Health Organization, 12% of the world’s population spends at least 10% of their income to pay for health care, with many of the lowest income families simply going without. By providing health care access, especially for vulnerable populations, companies can help reshape the landscape of how a natural disaster impacts personal health. In line with this is the provision of mental health benefits, which are often overlooked by providers or seen as add-on components that may not give adequate attention and priority. However, companies can do more than just provide for these modalities through their health care plans. They can also provide engaging leadership and resilience training, and resources that help employees learn to better manage issues such as stress, communication and interpersonal challenges.

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While organizations cannot control the outcomes of natural disasters, they can create safe, flexible and inclusive work environments where employees feel secure and safe to return after a natural disaster occurs. Making allowances for hybrid or remote work can go a long way to alleviate strain on those grappling with the aftermath of an environmental catastrophe. Employers should also thoroughly consider when it is safe to have employees return to their jobs after a weather crisis, ensuring they’re not placed in jeopardizing situations and can safely and productively resume work. Crafting contingency plans can help with this, by providing alternative locations or other means of producing work in a safe and responsible way. The start of hurricane season in the Atlantic Ocean reminds us that climate events are here to stay in the coming decades, and organizations can better adapt by understanding, measuring and addressing the impact of these events on the workforce to bolster resiliency for the years to come.

Michal Lörinc, head of Catastrophe Insight, and Madeleine Catzaras, ESG people solutions leader, EMEA Health, at Aon