Ports underwater: underwriters fail to price in climate-related flood risk
Sea level rise is no longer a distant concern — it’s an underwriting reality. Around the world, critical port and energy infrastructure is being built in regions that are already on borrowed time, exposed to hurricanes, storm surge and chronic high-tide flooding.
That is according to Dr Sarah Kapnick (pictured), global head of climate advisory at J.P. Morgan, who presented on the ‘Resiliency Amidst Rising Physical Risks’ at Convergence 2025.
While her presentation covered many physical risks, the example of risks posed to port infrastructure stood out. Kapnick explained: “By 2050, we’re expecting roughly 40 centimetres of sea level rise globally. But locally, that can double in certain places like Louisiana.” Over the next 25 years, that difference will reshape risk maps for the world’s major ports — including those that serve as gateways for global energy and goods.
Analysis shows that “over $35 million of expected losses per year” are already tied to climate-related damage, with “over $100 million per year along the Gulf Coast alone.” And the exposure is concentrated: “High-value regions are exactly where the insurance market is under pressure — high risk, high value, and yet the money keeps flowing in.”
Much of that investment is flowing into new liquefied natural gas (LNG) terminals and port expansions. Kapnick explained that “8% of all shipping around the world is maritime, half of that is fossil fuels, and much of it is now LNG. But the new terminals being built in Asia, the US and Australia are right in hurricane zones.”
The result: trillions in global trade depend on assets that are increasingly fragile — and increasingly difficult to insure. In Texas, the 2008 Hurricane Ike caused $2.4 billion in damages. “The analysis showed it would take $57 billion in investment to make the region resilient,” Kapnick explained. “It would take 20 years to build that protection — and 20 years from now, those ports could be underwater half the year if nothing is done.”
As a specific example, Kapnick explained that projections suggest Pier 21 at Galveston Port, with LNG infrastructure, will spend “between 120 and 250 days a year under high-tide flooding by 2050.” For insurers, reinsurers and ILS investors, these chronic risks are creeping closer to the balance sheet.
“I’m much more concerned about high-tide flooding than general sea level rise,” Kapnick warned. “Flooding could shut off parts of major ports one or twice a month. Over time, that becomes hundreds of days a year. It renders them useless.”
As sea level rise and chronic flooding escalate losses for coastal and energy infrastructure, demand will grow for capital that can absorb these increasingly systemic risks. Catastrophe bonds and parametric covers could help fill the gap where traditional insurance capacity is constrained — particularly for ports, LNG facilities, and other critical assets exposed to both acute events and slow-onset perils.
As global trade doubles over the next two decades, the re/insurance industry faces an uncomfortable question: “We know what it will cost to deal with these risks — but when does it start getting priced into the market?”
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