How public, private, and philanthropic leaders can scale the next chapter of climate resilience. A national call to action prepared for Chicago Climate Week and Aspen Ideas: Climate.
Bespoke deals are too complex to scale. Broad “green” designations are too vague to measure. A middle route can fund adaptation at the pace climate risk demands.
Bespoke deals are too complex to scale. Broad “green” designations are too vague to measure. A middle route can fund adaptation at the pace climate risk demands.
The Weekly: The Warning Signs of Uninsurability Are Visible Before the Tipping Point
Insurance markets don't become uninsurable overnight. The transition from insurable to uninsurable is the final stage of a sequence that can take years or decades to play out.
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- Feature: The six-stage sequence that turns a viable insurance market into an uninsurable one. - In the news: Construction costs surged in May at the fastest annual rate since the pandemic. - From the archive: Can home hardening discounts ease the insurability crisis? - Upcoming events: A summer webinar series on wildfire and flood insurability.
Insurance markets don't become uninsurable overnight. The transition from insurable to uninsurable is the final stage of a sequence that can take years or decades to play out—a chain reaction of rising hazard exposure, accumulated losses, revised models, reinsurance repricing, shifting corporate strategies, and regulatory friction.
In an article we published this week on The Epicenter, we mapped the six-stage process through which a market becomes uninsurable. Understanding those stages can help regulators, investors, and policymakers understand which assets and regions might be approaching the same fate.
Stage One: Insurers decide whether a market is worth entering
Insurers are not public utilities. They make strategic decisions about where to deploy capital based on scale, peril exposure, diversification, and regulatory conditions.
Stage Two: Insurers set limits on how much of any one risk they'll hold—and individual homes pay the price when those limits are reached
Once in a market, insurers manage portfolios of homes, but the profile of the overall portfolio matters far more than the characteristics of any individual property. A well-built, fire-resistant home can still be rejected by an insurer—not because there’s something uninsurable about that specific house, but because the insurer has no more room for that exposure type.
Stage Three: When losses exceed what models predicted, insurers begin reassessing their exposure
When losses force insurers to reassess their exposure, the trigger doesn't need to have occurred in the same market. A major wildfire event in New Mexico, for example, can prompt insurers to review their book and recognize they have clients with a similar risk profile in California.
Stage Four: Modeling firms revise their estimates, and insurers must decide whether to believe them
A decline in profitability can trigger a reset. Modeling firms revise their risk estimates and release updated outputs. When those outputs show elevated exposure, insurers have to decide how to react. Smaller insurers, who rely more on third-party models than proprietary analyses, can be the first to make changes.
Stage Five: Insurers decide they can no longer absorb the gap between their costs and what regulators allow them to charge
After evaluating the new risk data and potentially bearing higher reinsurance costs, insurers will reprice their premiums to reflect the new information. In heavily regulated states, that process can take years. Insurers facing inadequate prices have limited options: absorb losses, reduce exposure through nonrenewal, or exit.
Stage Six: Each insurer that exits leaves a worse book for those who stay
As insurers exit or raise prices, a collective judgment forms. Those remaining face an escalation of the problem: The highest-risk policies accumulate on their books as more cautious competitors leave. As a result, profitability deteriorates further. The market doesn't collapse like a bank run. Instead, an insurer becomes progressively less willing to insure at prior terms until it is confident it can deliver on its shareholders’ expectations.
The warning signs of uninsurability are visible before the tipping point
Understanding these six stages can help decision makers identify the next vulnerable market and work upstream. That means intervening before the risk gets locked in; first, at the pre-development stage. Then, by applying a resilient lens to construction—through defensible space, fire-resistant construction, and community-wide mitigation efforts.
Capital will follow demonstrable, measurable risk reduction. The markets that build that case early are the ones that will stay insurable.
Flood Insurance Gap Will Squeeze Local Governments and Homeowners, Moody’s Says | Insurance Journal | As flood risk grows and federal disaster support shrinks, a widening insurance gap is leaving homeowners, municipalities, and states increasingly exposed. Moody’s analysts warn that declining flood coverage, aging levees, and continued development in vulnerable areas could shift more recovery costs onto local governments.
Traditional Home Insurance Is Collapsing. Here’s What Could Fill the Gap | WIRED | WIRED Magazine explores the parametric insurance models gaining traction among cities, nonprofits, and governments seeking quicker access to recovery funds. Critics warn that rigid triggers and proprietary risk data could leave some communities without help after a disaster.
El Niño Turns Crumbling California Pier Into Climate Battleground Over What To Save — and Who Pays | LA Times | A cracked pier in Pacifica, California, is one piece of a larger dilemma: How and where should communities defend or harden coastal infrastructure? A recent white paper says that a powerful El Niño will be a “reckoning” for the California coast, accelerating erosion and flooding.
Read more about resilient public infrastructure and government solutions on The Epicenter here.
Real Estate & Construction
Transforming Toronto’s Port Lands: Flood Protection and a New Urban Future | Colliers | A Colliers case study of a major resilient development in Toronto: A $1.35-billion flood protection project uses greenspace and a constructed river valley to shield 290 hectares from severe storms, opening up a new island for mixed-use construction.
Construction Costs Surged in May at Fastest Annual Rate Since Pandemic | Construction Dive | Construction input prices rose nearly 10% over the past year, marking the fastest annual increase since the pandemic. It’s a growing factor to consider for communities investing in housing, infrastructure, and climate resilience projects that depend on predictable construction costs.
Read more about resilient real estate on The Epicenter here.
Private Investment
Nearly 80% of Data Center Capacity Is at Elevated Risk to Climate Hazards, Study Says | CNBC | First Street finds that nearly 80% of global data center capacity faces elevated threats from hazards such as flooding, wildfire, and extreme winds. The report argues that climate resilience is becoming an increasingly important factor for long-term investment performance.
The Adapt Interview Series #3: Christy Swann (RCOAST) | Climate Proof | Startup RCOAST is betting that better data can help communities facing coastal erosion make smarter resilience investments. Founder Christy Swann discusses how the company uses drones, geospatial data, and machine learning to evaluate the effectiveness of shoreline protection strategies and recommend solutions.
Read more about private investment on The Epicenter here.
Insurance Markets Don't Collapse Overnight | The Epicenter | For investors, regulators, and policymakers: a six-stage framework for identifying which markets might transition from insurable to uninsurable.
How to Sell Flood Infrastructure: Make It a Park | The Epicenter | Cities spent decades building pipes and pumps to move water out fast. Hoboken tried absorbing it instead—and cut flooding by 88%.
Can Home Hardening Discounts Ease the Insurability Crisis? | The Epicenter | The California FAIR Plan is proposing a huge rate hike, alongside incentives to reduce wildfire risk. The success of the effort hinges on cultivating a robust, affordable industry around fire-resilient construction.
Upcoming Event: Summer Webinar Series on Wildfire and Flood Insurability
Insurance for Good is hosting three webinars in July and August that explore fire and flood risk mitigation, uninsurability, and innovative insurance strategies.
July 10: Making Homes Insurable in High Wildfire-Risk Areas. Six experts will discuss wildfire loss reduction, access and affordability challenges, and opportunities to improve residential insurability. Register here.
July 14: Research for Practice: Improving Disaster Insurance Access & Experience. University of Minnesota’s Daniel Schwarcz presents his research on the legal and regulatory constraints limiting insurers' capacity to advance climate resilience, along with specific reforms states could adopt. Register here.
August 12: Flood Insurance: Overview and Ways Forward. Panelists will discuss National Flood Insurance Program trends, the private flood insurance market, and innovative insurance solutions that address community-specific flood risk. Register here.
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.
How public, private, and philanthropic leaders can scale the next chapter of climate resilience. A national call to action prepared for Chicago Climate Week and Aspen Ideas: Climate.
Bespoke deals are too complex to scale. Broad “green” designations are too vague to measure. A middle route can fund adaptation at the pace climate risk demands.
Bespoke deals are too complex to scale. Broad “green” designations are too vague to measure. A middle route can fund adaptation at the pace climate risk demands.
