As extreme weather events continue to outpace building codes, the construction industry is facing a growing threat from climate change. Yvonne Castillo, who leads risk management for architects and engineers at Victor Insurance, believes that the industry must confront the reality of climate risk. ‘We’re still building for the past,’ Castillo argues, as architects and engineers rely on outdated codes based on historical weather data rather than future conditions.
The consequences of this lag are already being felt. Severe weather events are no longer anomalies, with events like the 2021 Texas freeze, Panama Canal water shortages, and billion-dollar damage from wildfires and hurricanes becoming increasingly common. Castillo stresses that when designing buildings or critical infrastructure to last 50 or 100 years, it’s crucial to consider the climate conditions they’ll face during their lifespan.
However, there’s a disconnect between architects, owners, and contractors regarding the adequacy of current building codes. A study by the American Institute of Architects found that while architects believe codes don’t sufficiently address natural hazard risks, owners and contractors think they do. This mismatch in understanding means clients aren’t sounding the alarm, believing that following code is enough.
The insurance industry is also feeling the squeeze, with rising claims costs driven by climate-related events, supply chain disruptions, and labor shortages. New tariffs on building materials are adding to the uncertainty, making long-term planning nearly impossible. Castillo notes that the construction industry depends on labor, and when immigration policies reduce the labor pool, costs increase.
Despite these visible trends, Castillo is concerned that many in the industry are not adapting fast enough to climate-driven extreme weather. She believes the insurance industry has a unique role to play in bridging the gap between code and climate science, by revisiting how they model, price, and communicate risk. ‘We need to acknowledge what the science says: climate-related risks are projected to worsen through mid-century and beyond,’ Castillo warns.
The Insurance Industry’s Role
Castillo suggests that insurers can help clients become more informed by pointing to free public data from the Intergovernmental Panel on Climate Change and NOAA. She emphasizes that courts will increasingly expect professionals to have considered climate-related risks, even if they’re not climate scientists.
As the industry faces these challenges, Castillo believes that the formula for addressing climate risk is already available. What’s missing is the will to act on it. With costs rising and events increasing in frequency and severity, the construction and insurance industries must work together to address the growing threat of climate change.
