The Weekly: Takeaways from 2025’s Climate Disasters
Twenty-three billion-dollar disasters, $115 billion in damage, and not one hurricane: 2025 was a masterclass in how climate risk in the U.S. has changed.
The Weekly: The Risky Rise of State-Backed Reinsurance
Property insurance markets across the U.S. are under strain as premiums rise and insurers pull back from high-risk regions. In response, a growing number of states are leaning on public and quasi-public reinsurance backstops.
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By Matt Posner, Contributing Author for The Epicenter and Head of Public Finance for The Resiliency Company
Property insurance markets across the U.S. are under strain as premiums rise and insurers pull back from high-risk regions. In response, a growing number of states are leaning on public and quasi-public reinsurance backstops, shifting catastrophic risk onto taxpayers through state-backed funds, residual markets, and post-event assessments.
Florida offers a clear example. As private insurers and reinsurers retreated, the state expanded reliance on state-backed entities such as Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund. These structures are often described as market stabilizers, mechanisms designed to keep coverage available during periods of stress. In practice, they function as taxpayer-supported risk backstops, absorbing catastrophic exposure that private markets are increasingly unwilling to hold.
When losses exceed reserves, the state can levy mandatory assessments on policyholders statewide to cover claims. The result is risk redistribution instead of risk reduction. Floridians far from the coast are asked to subsidize rebuilding in high-risk areas, and developers and insurers are shielded from the full consequences of their decisions.
This approach may provide short-term political relief, but it is a long-term fiscal mistake. Public reinsurance reinforces the very behaviors that made insurance unaffordable in the first place:
- It transfers losses created by poor policy. When states suppress insurance prices or permit development in vulnerable areas, they increase future claims. Public reinsurance then forces taxpayers to absorb the cost.
- It distorts market signals. Rising reinsurance prices reflect increased loss frequency and severity. When states override those signals with public funds, they mute the warning system that should drive changes in land use, construction, and investment.
- It undermines sound building policies. The expectation of rescue becomes embedded in the system: insurers start to rely on public support in bad years, developers continue building in risky locations, and homeowners delay mitigation.
- It establishes a bailout precedent. Public reinsurance is rarely rolled back. Each storm, fire, or flood becomes justification for further expansion. What begins as an emergency measure becomes permanent exposure.
- It misallocates scarce public dollars. Every dollar used to absorb insurance losses after a disaster is a dollar not spent reducing the damage beforehand.
Read the full article here to learn how resilient revolving funds, local risk assessments, and private co-beneficiary financing can protect taxpayers and reduce risk.
What We’re Reading From the Resiliency Ecosystem
Insurance
- Is California’s Wildfire Bond a Missed Opportunity? | Climate Proof | California’s FAIR Plan recently issued a $750 million catastrophe bond tied solely to wildfire risk, the largest of its kind. While investors showed a strong appetite, critics argue the deal may simply shift risk without delivering tangible support for policyholders.
- Severe Convective Storms Become Costliest Insured Peril of 21st Century | Insurance Journal | Severe thunderstorms have supplanted tropical cyclones as the most expensive insured disaster globally and accounted for $52 billion in 2025 insured losses in the U.S. alone.
Read more about insurance on The Epicenter here.
Public Infrastructure
- The Climate Question That Economists Cannot Answer | The Atlantic | Economists can model potential climate damages under different scenarios, but still lack reliable tools to determine which future we’ll get. The Atlantic digs into the uncertainties at the heart of climate-related economic planning.
- It’s the Middle of Winter, but Drought Covers the U.S. That’s Concerning. | The Washington Post | An unusually widespread winter drought now affects most of the country, raising concerns about drinking water supply, crop production, and wildfire risk going into spring.
Read more about resilient public infrastructure and government solutions on The Epicenter here.
Real Estate & Construction
- A California Climate Expert Is Working to Restore Climate Risk Scores Deleted by Zillow | Inside Climate News | Climate policy expert Neil Matouka is building a public-data plugin to put risk information back in home buyers’ hands. The project highlights growing tensions around climate risk disclosure in real estate.
- Future-Proofing Real Estate Investment | OECD | A comprehensive OECD report examines how climate risks are reshaping real estate markets, underwriting, and investment decisions worldwide. The report includes recommendations on adaptation planning for the “asset classes most vulnerable to climate-related risks.”
Read more about resilient real estate on The Epicenter here.
Private Investment
- From Compliance to Advantage: Sustainability for Finance Leaders | Aon | As extreme weather drives losses and supply-chain disruptions, Aon argues that climate resilience is becoming a core financial strategy, not just a compliance issue. The piece shows how integrating sustainability and disaster risk into capital planning can protect long-term value and improve access to capital.
- Can Sound Waves Help Stop California's Wildfires? | Spectrum News 1 | The latest startup to tackle unconventional resilience technology, Sonic Fire Tech is using acoustic waves to interfere with the combustion process and prevent wildfire ignition.
The Epicenter Posts You Might Have Missed:
- States Shouldn’t Become Reinsurers of Last Resort | Matt Posner | States are making a mistake by using public reinsurance mechanisms to address rising insurance costs. Legislators should invest in climate resilience and risk reduction rather than transfer risk to taxpayers and ignore the underlying drivers of catastrophic insurance losses.
- What is Resilient Critical Infrastructure? | The Epicenter Editors | The Epicenter defines infrastructure as the physical, economic, and social systems central to the functioning of an economy and a society. Resiliency in critical infrastructure is about the ability to withstand extreme climate impacts and recover from them quickly.
- Product Innovation: The Key to Climate Resilience for the Insurance Sector | Francis Bouchard | Francis Bouchard, Managing Director of Climate for Marsh McLennan, interviewed Roy Wright, CEO of the Insurance Institute for Business & Home Safety (IBHS), to discuss the future of insurance in the age of climate change and the importance of product innovation.
The Statistic of the Week
7 homes
Out of 13,000 homes destroyed in the L.A. fires, only seven have been completely rebuilt.
Source: Grist.
Have thoughts to share or want to add your voice to the conversation? Reach out!
The Epicenter helps decision makers understand climate risks and discover viable resilience solutions. The Epicenter is an affiliated publication of The Resiliency Company, a 501(c)3 nonprofit dedicated to inspiring and empowering humanity to adapt to the accelerating challenges of the next 100+ years.
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