An adaptation-minded property insurance system means safer, healthier, more resilient communities and economies that can both prepare for and recover from climate disasters in an affordable, sustainable, equitable way.
3% of U.S. GDP is spent every year on preparing for and repairing from disasters.
The Epicenter editors recently interviewed Daniel Zarrilli, former Chief Resilience Officer for New York City and current Chief Climate & Sustainability Officer at Columbia University, about his work during the post-Hurricane Sandy recovery effort.
An adaptation-minded property insurance system means safer, healthier, more resilient communities and economies that can both prepare for and recover from climate disasters in an affordable, sustainable, equitable way.
By Marissa Knodel, Independent Climate Adaptation Advocate/Scholar/Researcher
For generations, property insurance has been the invisible infrastructure supporting the American dream of homeownership. But as climate change makes disasters like hurricanes, wildfires, severe storms, and flooding more frequent and more destructive, cracks in that infrastructure are starting to form.
Between 2011 and 2024, nearly every Congressional district experienced at least one federally declared major disaster due to extreme weather. As a result, insurance premiums, reinsurance rates, policy non-renewals, and cancellations are on the rise across the country. This climate-driven insurance crisis is exposing vulnerabilities and inequities in how we safeguard homes, businesses, and entire communities.
As host Doug Parsons explored on a recent podcast episode of America Adapts, where he interviewed ten experts on the fast-changing world of climate risk and insurance, property insurance needs to adopt an adaptation mindset to survive in the era of climate change.
The podcast guests had diverse backgrounds and domains of expertise—policy experts advancing insurance reform, senior executives from leading insurance companies, a Miami real estate agent, and innovators using big data and advanced technology to transform how risk is measured—but the consensus was the same: the insurance system, as it currently stands, is unable to account for and adapt to the risks of a changing climate.
This brewing crisis stems from three interconnected factors:
An insurance system designed for adaptation would prioritize these five pillars:
Predictive risk analytics, using data from satellites, planes, drones, and ground-based phenology stations, can help forecast future physical risk and associated financial losses for an individual home or neighborhood. Under California’s Sustainable Insurance Strategy, Mercury Insurance in California is selling additional policies in wildfire-threatened areas based on computer models that incorporate climate change and other risk parameters to help predict property damage and price claims. And in the reinsurance market, reinsurers like Munich Re are taking a science-backed approach to risk mitigation.
Housing inequities prevent physical risk reduction measures from being deployed at speed and scale, and property insurance increases can stymy efforts to build more resilient and affordable housing for vulnerable populations. One path forward, as presented in the podcast by Moira Birss of the Climate and Community Institute and in this paper, is to couple state-level public disaster insurance with comprehensive risk reduction programs to create a more direct relationship between risk reduction and insurance provision while more equitably pooling and spreading risks.
In Inclusive Insurance for Climate-Related Disasters: A Roadmap for the United States, Carolyn Kousky and Karina French from the Environmental Defense Fund detail a variety of actions to create a more inclusive disaster insurance system. Their recommendations include:
Local, state, and Tribal governments are responsible for the majority of infrastructure investments, but the benefits of resilient investments and risk mitigation efforts are not often captured when setting insurance rates. Moving forward, subnational governments can work with insurers, businesses, residents, and others to share costs and benefits to make financing resilience more actionable.
Los Angeles offers one emerging blueprint:
When insurance customers have access to transparent information about their insurance options and how plans are priced, they can make better, more affordable decisions to meet their specific needs. The California legislature just passed a law to create the nation’s first public catastrophe model for wildfires, which can help verify and provide transparency into how private insurers calculate rates.
Private sector innovations are also emerging: Premium Lock, as presented in the podcast by Dylan DiMarchi with Eventual, is a third-party service attached to a one-year insurance policy that gives property owners a measure of multi-year security by reimbursing the property owner if carriers raise premiums above a predicted level.
The frequency and severity of disasters create an opportunity for insurers to innovate: developing new products and strategies designed for the era of climate change. Adaptation-designed insurance solutions are beginning to emerge: community-based catastrophe insurance, community-embedded insurance, and parametric microinsurance all represent new approaches that reduce the protection gap and expand coverage.
For more on the frontier of insurance innovation, check out this Epicenter article on parametric heat insurance and this Epicenter article on the need for insurance product innovation.
As several experts articulated on the America Adapts podcast, designing for adaptation will require collaboration between private and public actors.
There are still many unanswered questions about how this public-private coordination happens and whether implementation can happen at the scale and speed necessary to meet the joint climate-insurability crises.
An adaptation-minded property insurance system means safer, healthier, more resilient communities and economies that can both prepare for and recover from climate disasters in an affordable, sustainable, equitable way.
No home or place should be uninsurable, and those who want insurance should be able to access and afford policies that can protect and adapt to the fluctuating future risks of a changing climate.
Have thoughts to share on this piece, or want to add your voice to the conversation? Reach out!
3% of U.S. GDP is spent every year on preparing for and repairing from disasters.
The Epicenter editors recently interviewed Daniel Zarrilli, former Chief Resilience Officer for New York City and current Chief Climate & Sustainability Officer at Columbia University, about his work during the post-Hurricane Sandy recovery effort.
Each time the federal government closes, it reinforces a simple truth: the center can no longer hold. The work of building resilient infrastructure and communities must now happen locally.
Insights & ideas on resilience straight to your inbox. Were you forwarded this email? → Subscribe here Nowhere is the proverb
