Duke University and the University of Georgia (UGA) propose an Industry-University Collaborative Research Center (IUCRC) called the Center for Innovation in Risk-analysis for Climate Adaptation and Decision-making (CIRCAD). CIRCAD will be an interdisciplinary, high-impact research center that integrates climate science and engineering, data science and modeling, risk assessment and decision theory, and economic and policy analysis to develop and promote innovative and actionable strategies, products, and practices that support the insurance industry in addressing climate risk. CIRCAD will recruit, mentor, and develop a diverse, highly trained, climate-ready workforce. We have identified three key challenges to the insurance industry’s ability to cost-effectively manage climate risk and catalyze society-wide climate risk reduction. First, there exists a fundamental mismatch between the typical 12-month term for individual insurance contracts and the long-term, systemic nature of climate exposures, eliminating the industry’s ability to clearly signal risk and incentivize mitigation via premiums. Second, the existing suite of climate risk models used to set insurance premiums does not adequately account for risk mitigation measures at the systems scale, thereby reducing the incentive and ability of communities to design and implement effective measures. Finally, the basic climate research and data products available today do not fulfill the decision-making needs of insurers, and there is little consistency in data reporting formats, standards, and platforms. CIRCAD’s research, coordination, and convening activities will seek to address these three challenges. Intellectual advances anticipated from the current set of projects include: (i) design, evaluation, and pilot testing of novel climate-responsive insurance solutions and risk mitigation strategies; (ii) development of methods and models for quantifying climate resilience at a systems scale, with a focus on the value of nature based solutions; and (iii) application of decision theory to the compilation, evaluation, and use of climate data and models to reduce uncertainty in risk management and investment decisions. We expect our research and engagement activities to not only support the insurance industry in its risk management role, but also stimulate complementary risk mitigation efforts by governments, businesses, and individuals. Further, dissemination of the knowledge and tools produced by this research will enhance climate risk decision-making and resilience on a national scale. In addition, CIRCAD will initiate or augment four programs that collectively span a range of workforce development stages and training needs: (i) undergraduate and master’s student team projects, (ii) master’s, doctoral, and post-doc trainee research experience and mentorship, (iii) advanced degree programs in risk engineering, climate and sustainability, and financial technology, and (iv) opportunities for shared learning between students and professionals, both in the classroom and in the workplace, including co-enrolled short courses, internships, and co-ops.
Funder: NSF
Amount: $500,000
PI: Marc Ragin, Terry College of Business