Insurers are essential to helping society build resilience against rising physical risk, but they can’t do it alone.

That’s according to Kathryn Bakos, managing director for finance and resilience at the Intact Center on Climate Adaptation at the University of Waterloo, who recently spoke with Linda-Eling Lee, the MSCI Institute’s founding director.

Many businesses and communities have yet to integrate the rising cost of flooding, extreme heat and other physical risks into their decision-making, says Bakos. “If businesses and communities aren’t reducing their exposure, insurers are left pricing and managing that increasing risk,” she notes, adding that she sees the need for collective action.

Bakos and her colleagues focus on precisely such action, working with homeowners, communities, governments and businesses to identify and reduce the impacts of extreme weather and climate change, with a focus on practical solutions.

That includes tools that help businesses identify their costliest weather-related risks and how to reduce them, information of significant interest to insurers. Bakos also spearheaded one of Canada’s first analyses of catastrophic flooding on home prices and is currently examining the link between flooding and mental-health outcomes using anonymized data from a large insurer.

The work connects physical risk with real-world impacts and the financial system to improve decision-making. The implications are broad. “Insurance is a very good proxy for growing risk in the system,” Bakos says.