The Institutes’ Pete Miller and Francis Bouchard of Marsh McLennan discuss how AI is transforming property/casualty insurance as the industry attacks theclimate crisis.
“Climate” is not a popular word in Washington, D.C., today, so it would take a certain audacity to hold an event whose title prominently includes it in the heart of the U.S. Capitol.
For two days, expert panels at the Ronald Reagan Building and International Trade Center discussed climate-related risks – from flood, wind, and wildfire to extreme heat and cold – and the role of technology in mitigating and building resilience against them. Given the human and financial costs associated with climate risks, it was appropriate to see the property/casualty insurance industry strongly represented.
Peter Miller, CEO of The Institutes, was on hand to talk about the transformative power of AI for insurers, and Triple-I President and CEO Sean Kevelighan discussed – among other things – the collaborative work his organization and its insurance industry members are doing in partnership with governments, non-profits, and others to promote investment in climate resilience. Triple-I is an affiliate of the Institutes.
Sean Kevelighan of Triple-I and Denise Garth, Majesco’s chief strategy officer, discuss how to ensure equitable coverage against climate events.
You can get an idea of the scope and depth of these panels by looking at the agenda, which included titles like:
Building Climate-Resilient Futures: Innovations in Insurance, Finance, and Real Estate;
Fire, Flood, and Wind: Harnessing the Power of Advanced Data-Driven Technology for Climate Resilience;
The Role of Technology and Innovation to Advance Climate Resilience Across our Cities, States and Communities;
Pioneers of Parametric: Navigating Risks with Parametric Insurance Innovations;
Climate in the Crosshairs: How Reinsurers and Investors are Redefining Risk; and
Safeguarding Tomorrow: The Regulator’s Role in Climate Resilience.
As expected, the panels and “fireside chats” went deep into the role of technology; but the importance of partnership, collaboration, and investment across stakeholder groups was a dominant theme for all participants. Coming as the Trump Administration takes such steps as eliminating FEMA’s Building Resilient Infrastructure and Communities (BRIC) program; slashing budgets of federal entities like the National Oceanographic and Atmospheric Administration (NOAA) and the National Weather Service (NWS); and revoking FEMA funding for communities still recovering from last year’s devastation from Hurricane Helene, these discussions were, to say the least, timely.
Helge Joergensen, co-founder and CEO of 7Analytics, talks about using granular data to assess and address flood risk.
In addition to the panels, the event featured a series of “Shark Tank”-style presentations by Insurtechs that got to pitch their products and services to the audience of approximately 500 attendees. A Triple-I member – Norway-based 7Analytics, a provider of granular flood and landslide data – won the competition.
Earth Day 2025 is a good time to recognize organizations that are working hard and investing in climate-risk mitigation and resilience – and to recommit to these efforts for the coming years. What better place to do so than walking distance from both the White House and the Capitol?
The Trump Administration’s unwinding of the Building Resilient Infrastructure and Communities (BRIC) program and cancellation of all BRIC applications from fiscal years 2020-2023 reinforce the need for collaboration among state and local government and private-sector stakeholders in climate resilience investment.
Congress established BRIC through the Disaster Recovery Reform Act of 2018 to ensure a stable funding source to support mitigation projects annually. The program has allocated more than $5 billion for investment in mitigation projects to alleviate human suffering and avoid economic losses from floods, wildfires, and other disasters. FEMA announced on April 4 that it is ending BRIC .
Chad Berginnis, executive director of the Association of State Floodplain Managers (ASFPM), called the decision “beyond reckless.”
“Although ASFPM has had some qualms about how FEMA’s BRIC program was implemented, it was still a cornerstone of our nation’s hazard mitigation strategy, and the agency has worked to make improvements each year,” Berginnis said. “Eliminating it entirely — mid-award cycle, no less — defies common sense.”
While the FEMA press release called BRIC a “wasteful, politicized grant program,” Berginnis said investments in hazard mitigation programs “are the opposite of ‘wasteful.’ “ He pointed to a study by the National Institute of Building Sciences (NIBS) that showed flood hazard mitigation investments return up to $8 in benefits for every $1 spent.
“At this very moment, when states like Arkansas, Kentucky, and Tennessee are grappling with major flooding, the Administration’s decision to walk away from BRIC is hard to understand,” Berginnis said.
Heading into hurricane season
Especially hard hit will be catastrophe-prone Florida. Nearly $300 million in federal aid meant to help protect communities from flooding, hurricanes, and other natural disasters has been frozen since President Trump took office in January, according to an article in Government Technology.
The loss of BRIC funding leaves dozens of Florida projects in limbo, from a plan to raise roads in St. Augustine to a $150 million effort to strengthen canals in South Florida. According to Government Technology, the agency most impacted is the South Florida Water Management District, responsible for maintaining water quality, controlling the water supply, ecosystem restoration and flood control in a 16-county area that runs from Orlando south to the Keys.
“The district received only $6 million of its $150 million grant before the program was canceled,” the article said. “The money was intended to help build three structures on canals and basins in North Miami -Dade and Broward counties to improve flood mitigation.”
Florida’s Division of Emergency Management must return $36.9 million in BRIC money that was earmarked for management costs and technical assistance. Jacksonville will lose $24.9 million targeted to raise roads and make improvements to a water reclamation facility.
FEMA announced the decision to end BRIC the day after Colorado State University’s (CSU) Department of Atmospheric Science released a forecast projecting an above-average Atlantic hurricane season for 2025. Led by CSU senior research scientist and Triple-I non-resident scholar Phil Klotzbach CSU research team forecasts 17 named storms, nine hurricanes – four of them “major” (Category 3, 4, or 5). A typical season has 14 named storms, seven hurricanes – three of them major.
Nationwide impacts
More than $280 million in federal funding for flood protection and climate resilience projects across New York City — “including critical upgrades in Central Harlem, East Elmhurst, and the South Street Seaport” – is now at risk, according to an article in AMNY. The cuts affect over $325 million in pending projects statewide and another $56 million of projects where work has already begun.
Senate Majority Leader Chuck Schumer and Gov. Kathy Hochul warned that the move jeopardizes public safety as climate-driven disasters become more frequent and severe.
“In the last few years, New Yorkers have faced hurricanes, tornadoes, blizzards, wildfires, and even an earthquake – and FEMA assistance has been critical to help us rebuild,” Hochul said. “Cutting funding for communities across New York is short-sighted and a massive risk to public safety.”
According to the National Association of Counties, cancellation of BRIC funding has several implications for counties, including paused or canceled projects, budget and planning adjustments, and reduced capacity for long-term risk reduction.
North Dakota, for example, has 10 projects that were authorized for federal funding. Those dollars will now be rescinded. Impacted projects include $7.1 million for a water intake project in Washburn; $7.8 million for a regional wastewater treatment project in Lincoln; and $1.9 million for a wastewater lagoon project in Fessenden.
“This is devastating for our community,” said Tammy Roehrich, emergency manager for Wells County. “Two million dollars to a little community of 450 people is huge.”
The cancellation of BRIC roughly coincides with FEMA’s decision to deny North Carolina’s request to continue matching 100 percent of the state’s spending on Hurricane Helene recovery.
“The need in western North Carolina remains immense — people need debris removed, homes rebuilt, and roads restored,” said Gov. Josh Stein. “Six months later, the people of western North Carolina are working hard to get back on their feet; they need FEMA to help them get the job done.”
Resilience key to insurance availability
Average insured catastrophe losses have been on the rise for decades, reflecting a combination of climate-related factors and demographic trends as more people have moved into harm’s way.
“Investing in the resilience of homes, businesses, and communities is the most proactive strategy to reducing the damage caused by climate,” said Triple-I Chief Insurance Officer Dale Porfilio. “Defunding federal resilience grants will slow the essential investments being made by communities across the U.S.”
Flood is a particularly pressing problem, as 90 percent of natural disasters involve flooding, according to the National Flood Insurance Program (NFIP). The devastation wrought by Hurricane Helene in 2024 across a 500-mile swath of the U.S. Southeast – including Florida, Georgia, the Carolinas, Virginia, and Tennessee – highlighted the growing vulnerability of inland areas to flooding from both tropical and severe convective storms, as well as the scale of the flood-protection gap in non-coastal areas.
Coastal flooding in the U.S. now occurs three times more frequently than 30 years ago, and this acceleration shows no signs of slowing, according to recent research. By 2050, flood frequency is projected to increase tenfold compared to current levels, driven by rising sea levels that push tides and storm surges higher and further inland.
In addition to the movement of more people and property into harm’s way, climate-related risks are exacerbated by inflation (which drives up the cost of repairing and replacing damaged property); legal system abuse, (which delays claim settlements and drives up insurance premium rates); and antiquated regulations (like California’s Proposition 103) that discourage insurers from writing business in the states subject to them.
Thanks to the engagement and collaboration of a range of stakeholders, some of these factors in some states are being addressed. Others – for example, improved building and zoning codes that could help reduce losses and improve insurance affordability – have met persistent local resistance.
As frequently reported on this blog, the property/casualty insurance industry has been working hard with governments, communities, businesses, and others to address the causes of high costs and the insurance affordability and availability challenges that flow from them. Triple-I, its members, and partners are involved in several of these efforts, which we’ll be reporting on here as they progress.
Approximately 2.5 million Americans in 1.4 million homes will be at risk from severe coastal flooding by 2050, with Florida, New York, and New Jersey facing the highest exposure, according to a new report from Climate Central’s Coastal Risk Finder.
Coastal flooding in the U.S. now occurs three times more frequently than 30 years ago, and this acceleration shows no signs of slowing. By 2050, flood frequency is projected to increase tenfold compared to current levels, driven by rising sea levels that push tides and storm surges higher and further inland, according to the report.
The report defines a “severe flood” as one with a 1% chance of occurring in any given year. Such events, while statistically rare, can cause catastrophic damage to communities and infrastructure. The analysis incorporates the latest elevation data, levee information, sea level rise projections, and U.S. Census statistics to create comprehensive risk assessments.
Regional differences in risk exposure are significant. While the densely populated Northeast shows higher numbers of at-risk residents, the Gulf region faces greater land area vulnerability due to higher rates of sea level rise and naturally low-lying coasts.
Vulnerable Communities and Populations
Florida leads the nation with 505,000 residents projected to face risk from a severe coastal flood by 2050, followed by New York and New Jersey. At the municipal level, New York City tops the list with an estimated 271,000 people living in “high” at-risk areas. Among the cities with the highest exposure, six are located in the Northeast.
The report also highlighted a troubling demographic pattern: older adults face disproportionate exposure to coastal flood risks. Nearly 540,000 people aged 65 or older live in areas at risk of severe coastal flooding by 2050, representing 22% of the total at-risk population despite comprising only 16% of residents in coastal states. Florida has the highest number of vulnerable seniors with more than 143,000 at risk, while Maine, Oregon, and Delaware show the highest proportions of seniors living in flood-prone areas.
Social vulnerability—the combination of socioeconomic factors that worsen disaster impacts—further complicates the risk landscape. The report utilizes the U.S. Census Bureau’s Community Resilience Estimates to identify individuals with various risk components. Of the 2.5 million Americans in flood-risk zones, approximately 1.85 million (74%) have at least one component of risk, and 617,000 (25%) have three or more risk factors.
“Older adults, especially those living in care facilities, are among the most vulnerable to death and health setbacks due to hurricanes, storm surges, and other floods,” the report noted, emphasizing that age is just one of many factors contributing to vulnerability.
Tools and Adaptation Imperatives
The Coastal Risk Finder tool, which informed this report, offers detailed flood projections and risk assessments for any coastal state, county, city, town or district in the contiguous U.S. Developed following interviews with over 100 government officials, community leaders and researchers, the tool addresses the specific information needs of coastal communities.
Users can access customized maps, graphics and data to understand flood risks under different climate scenarios. The tool includes specific resources for media professionals, government officials and community leaders to help communicate and plan for worsening coastal flood risks.
The full range of demographic data, including social vulnerability metrics, is available for states, counties and cities through the Coastal Risk Finder, enabling communities to develop more targeted and equitable resilience plans.
Heading into 2025, countless communities are still grappling with the $27 billion natural disasters that impacted the United States last year – a total driven by costly storms and severe inland flooding. Many affected residents lacked flood coverage and will rely almost exclusively on federal relief funding to recover, underscoring a widespread protection gap.
Aiming to expedite disaster recovery for riverine communities in the Mississippi River Basin, the Mississippi River Cities and Towns Initiative (MRCTI) recently announced a flood insurance pilot currently in development with Munich Re that will use parametric insurance.
Unlike traditional indemnity insurance, parametric structures cover risks without sending adjusters to evaluate post-catastrophe damages. Rather than paying for specific damages incurred, parametric policies issue agreed-upon payouts if certain conditions are met – for example, if wind speeds or rainfall measurements meet an established threshold. Speed of payment and reduced administration costs can ease the burden on both insurers and policyholders, especially as weather and climate risks become more severe and unpredictable.
Several insurers demonstrated this efficiency in the wake of last year’s hurricanes – among them climate risk-management firm Arbol, which paid out $20 million in parametric reinsurance claims within 30 days after Milton made landfall.
Coast-to-coast trends
Though the MRCTI pilot presents a novel approach to inland flooding, similar pilots are already underway along the coast. New York City developed its own parametric flood program following Superstorm Sandy to bolster the resilience of low- and moderate-income neighborhoods struggling to recover. The program received enough funding last year not only for renewal but expansion, bringing needed protection to even more vulnerable communities.
For flood-prone Isleton, Calif. – a small Sacramento County town that lacks the resources to support a police department – risk mitigation has long taken a backseat to more immediate concerns. But the city’s location in a floodplain made it the perfect candidate for California’s parametric flood pilot, backed by a two-year, $200,000 grant going into effect this year.
The emergence of these community flood solutions reflects a growing interest in parametric insurance throughout the U.S., which propelled the $18 billion value of the global parametric insurance market in 2023. From Lloyd’s first dedicated parametric syndicate to Amwins’ parametric program for golf courses, more parametric coverage options are available than ever before, particularly after numerous private carriers – emboldened by improved data analytics and modeling – expanded their parametric flood insurance business in the U.S. last year.
Take FloodFlash, a leading parametric flood insurance provider based in London. Initially limited to five states, FloodFlash became known for offering coverage beyond the National Flood Insurance Program’s (NFIP) limits and in areas traditionally unsupported by private markets. Increased broker demand motivated the company, in partnership with Munich Re, to gradually roll out coverage to all mainland states last year, ahead of active hurricane season forecasts.
New insurance startups like Ric are also lowering the cost of entry into innovative parametric-based resilience. A winner of the RISE Flood Insurance of the Future Challenge, Ric will launch later this year on the coasts with micro-policies ranging from $14 to $50 per month. The company plans to collaborate with employers to extend their policies as employee benefits, which could help raise awareness of and reduce coverage gaps.
Regulatory momentum
As parametric risk transfer continues to gain traction, regulatory uncertainty in the absence of corresponding insurance laws persists. Given that many jurisdictions have structured their legal insurance framework around traditional indemnity principles, it’s unclear how restrained insurers in some areas are to issuing payouts only for actual losses.
Determining appropriate thresholds for coverage poses another challenge. For example, following extensive devastation from Hurricane Beryl last year, a $150 million parametric catastrophe bond did not yield a payout because air pressure levels narrowly missed the predefined minimum. The ensuing backlash included an intergovernmental “examination” into insurance-linked securities broadly and sparked industry-wide debate surrounding the equity of parametric structures.
To date, only a handful of states have enacted parametric insurance legislation, though substantial movement last year suggests more regulations are on the horizon. Notably, Vermont updated its previous 2022 law permitting captive insurance companies to enter parametric contracts. Based on evidence of their utility as insurance contracts, parametric contracts are now less restricted.
New York also unanimously passed its first parametric insurance law, recognizing parametric coverage as an authorized form of personal line insurance within the state. The law further stipulates mandatory disclosures on all parametric applications that distinguish parametric insurance as less comprehensive, and therefore not a substitute for, traditional property and flood insurance.
Such regulations are a promising step forward towards refining parametric coverage and facilitating its adoption across the country, but tensions between parametric and indemnity risk structures remain largely unresolved. Navigating how parametric insurance functions alone or as part of a package including indemnity coverage will require more collective input from all industry stakeholders.
One thing is for certain: traditional risk-transfer mechanisms are no longer sufficient to address the risk crisis presented by our evolving climate. Tools like parametric insurance – paired with hazard mitigation and community resilience planning – are guiding the way forward.
Guest column by Sean Kevelighan, Chief Executive Officer of the Insurance Information Institute, published in the Ventura County Star.
As catastrophic wildfires blaze through Southern California, the human toll is heartbreaking, and the financial aftermath is staggering. For the millions impacted, the first step is safety. But as the flames subside, families will turn to insurers — California’s financial first responders — for recovery and rebuilding. Yet, even as insurers deliver on their promise to customers, the state’s insurance market continues to face headwinds.
The truth is, California’s insurance system has been in crisis for years. Wildfires are burning through not only our forests and communities but also the fragile foundation of an insurance market that has struggled under decades-old regulations.
Recent reforms, including the long-awaited “Sustainable Insurance Strategy,” are a step in the right direction. With implementation beginning in 2025, the new strategy poses a potential to fix the troubles of the past and rebuild with a more robust, sustainable and insurable market after what may be the worst wildfires in California’s history. However, there is some damage done that we need to overcome.
For years, insurers have sounded the alarm. They have warned policymakers about the urgent need to modernize regulations so the system can function in the face of increasing climate risks. But change has been slow, and the consequences are now clear.
Some insurers have made the difficult decision to stop writing policies in California or leave the market entirely. These companies do not want to abandon the state — California is the largest insurance market in the U.S. and one of the largest economies in the world. But without the ability to manage and price risk effectively, their hands are tied.
For decades, California has not allowed insurers to model future catastrophic risks, such as wildfires, for pricing purposes. Additionally, rate increases above 7% have been subjected to an arduous approval process, forcing insurers to submit not actuarially sound rates capped at 6.9%. Meanwhile, the costs of claims have skyrocketed. Between 2019 and 2022, inflation drove homeowners’ replacement costs up by a cumulative 55% nationally. When inflation is paired with worsening wildfire risks year after year, the math simply does not add up.
One of the biggest lessons from California’s risk crisis is the need for collective action. The rising frequency and severity of wildfires demand a united effort to build resilience. While preventative measures like brush clearing and fireproofing homes are helpful, they are not enough when wildfires of this magnitude strike. It is clear we need large-scale solutions, including investments in fire prevention, smarter land-use planning and policies that incentivize sustainable development.
It is disheartening that it often takes a major catastrophe to spur action. But this is California’s opportunity to address the root causes of this crisis. A resilient future requires modernizing our insurance market, adopting climate-conscious policies, and committing to long-term investments in disaster prevention and recovery.
Insurers want to serve Californians, and they want to be in California. But without systemic changes, the cycle of crisis will only continue. This is not just about insurance — it is about protecting our homes, our communities and the state from the growing risks of a changing climate. The time to act is now, before the next disaster strikes.
For insurers, “customer” is one word that encompasses individual policyholders, business owners, risk managers, agents and brokers, and others, all with different (often divergent) priorities. For reinsurers – whose primary customers are insurers themselves – “understanding the customer” is particularly challenging.
This was part of the motivation behind RiskScan 2024 – a collaborative survey carried out by Munich Re US and Triple-I. The survey provides a cross-market overview of top risk concerns among individuals across five key market segments: P&C insurance carriers, P&C agents and brokers, middle-market business decision makers, small business owners, and consumers. It explores not only P&C risks, but also how economic, political, and legal pressures shape risk perceptions.
“I get very excited when we have a chance to be in our customers’ shoes,” said Kerri Hamm, EVP and head of cyber underwriting, client solutions, and business development at Munich Re US, in a recent Executive Exhange interview with Triple-I CEO Sean Kevelighan. “To really understand how they feel about a broad range of issues from what are their most important risks to how they feel about the cost of insurance and the economic environment.”
Hamm discussed how more than one-third of respondents ranked economic inflation, cyber risk, and climate change as top concerns, identifying them as “increasing or resulting in rises of the cost of insurance.”
“When we really understand what our customers want, we can design a better product and think about whether the coverages we’re providing are meaningful to them,” Hamm said. “That can help us match pricing better to their expectations.”
One result that Hamm found “surprising” was that “legal system abuse” didn’t appear to be as widely accepted by respondents – apart from the insurance professionals – as driving up insurance costs. Kevelighan cited other research – including by Triple-I’s sister organization, the Insurance Research Council – that has found consumers to be aware of the growing influence of “billboard attorneys”.
Unfortunately, he said, “They don’t seem to be making the connection with how that’s affecting them. What we’re trying to do at Triple-I is to help them make that connection.”
Kevelighan talked about Triple-I’s education campaign around “the billboard effect” in Georgia. That campaign includes an actual billboard (“Trying to fight fire with fire,” he said), as well as a microsite called Stop Legal System Abuse. The campaign focuses on Georgia because the state tops the most recent list of places that the American Tort Reform Foundation calls“judicial hellholes”.
“We’re trying to help citizens in Georgia see that this is costing you,” Kevelighan said, adding that Triple-I has seen high engagement through the program with people in the state.
Identifying opportunities to mitigate climate risk was on the minds of “Risk Take” presenters at Triple-I’s 2024 Joint Industry Forum (JIF). Risk Takes – a new addition at JIF – are 10-minute problem/solution-oriented presentations by high-impact experts who are deeply engaged in addressing specific perils.
Inserted between panel discussions of broader issues and trends, these compact talks were tightly focused on how current challenges are being met.
Munich Re US, for example, is diving deep into understanding how consumers and insurers perceive climate-related risks. According to RiskScan 2024, a recently published survey by Munich Re US and Triple-I, more than one-third of respondents ranked climate change as a top concern, identifying it as “a key driver of insurance costs,” said Kerri Hamm, EVP and head of cyber underwriting, client solutions, and business development at Munich Re US.
However, when it comes to flood risk, the survey highlighted a substantial disconnect between concern about the peril and understanding of related insurance coverage. Despite understanding the rising severity of climate risks and their direct influence on insurance costs, many consumers erroneously believe their homeowners policy includes flood coverage or that they do not reside in an area at risk of flooding, contributing to a significant flood protection gap.
High-risk areas are only expanding, Hamm pointed out, as upsurges in flash flooding implicate more and more noncoastal properties. Increased private-sector interest in flood risk has led to new forms of flood coverage, such as a private Inland Flood Endorsement offered at Munich Re, to support these properties. Take-up rates for these insurance products remain low – underscoring the importance of consumer education and improved training for agents and brokers to encourage flood insurance sales.
“We can do better as an industry to make options available, attractive, and better known to vulnerable homeowners,” Hamm said. Education is vital, as is “developing innovative solutions that benefit our society by closing the insurance gap.”
Combining geoscience with data science is one solution, said Helge Jørgensen, CEO and co-founder of the Norway-based 7Analytics. Jørgensen discussed how, by leveraging geological and hydrological information with machine learning technology, his company develops granular data that can map out property flood risk “neighbor by neighbor,” enabling highly representative flood policies.
Beyond incentivizing private insurers to write flood coverage, this data is further “crucial for communities,” Jørgensen stressed, “because, if you have a lot of information on which areas and buildings are more exposed to flooding, then you can build resilience.”
Urban growth, particularly rising populations in higher-risk areas, render community-level resilience initiatives even more important, he noted.
Guidewire’s Christina Hupy reinforced Jørgensen’s emphasis on utilizing granular data while discussing HazardHub, a property risk data platform owned by Guidewire.
“Historically, risk data was provided only at the Census block or even ZIP code level,” Hupy said, whereas HazardHub provides comprehensive and updated geospatial data across various perils to pinpoint individual property risk levels.
In collaboration with Triple-I, HazardHub will release a report in early 2025 focusing on wildfire risk within three high-risk California counties, aiming to demonstrate how using detailed geographic data can help sustain or improve underwriting profitability within such areas.
“We’re going to need to look at mitigation in these high-risk areas as the next frontier,” Hupy said, “to spark that interest from California government and carriers” and enhance resilience “both from a customer and a business perspective” in the state.
California’s Department of Insurance helped launch this frontier last month by announcing new regulations allowing insurers to use catastrophe risk modeling to set rates, rather than limiting insurers to only historic risk data, as was the rule for decades. Insurers must also expand their coverage in riskier areas and account for resilience efforts when setting rates, which was also not previously possible.
Alongside emerging forms of insurance coverage and innovative granular data tools, such regulations empower the insurance industry to incentivize climate risk mitigation and achieve considerable progress towards eliminating the protection gap.
California’s Department of Insurance last week posted long-awaited rules that remove obstacles to profitably underwriting coverage in the wildfire-prone state. Among other things, the new rules eliminate outdated restrictions on use of catastrophe models in setting premium rates.
The measure also extends language related to catastrophe modeling to “nature-based flood risk reduction.” In the original text, “the only examples provided of the kinds of risk mitigation measures that would have to be considered in this context involved wildfire. However, because the proposed regulations also permit catastrophe modeling with respect to flood lines, it was appropriate to add language to this subdivision relating to flood mitigation.”
The relevant language applies “generally to catastrophe modeling used for purposes of projecting annual loss,” according to documents provided by the state Department of Insurance.
Benefits for policyholders
As a result, the department said in a press release, “Homeowners and businesses will see greater availability, market stability, and recognition for wildfire safety through use of catastrophe modeling.”
For the past 30 years, California regulations – specifically, Proposition 103 – have required insurance companies to apply a catastrophe factor to insurance rates based on historical wildfire losses. In a dynamically changing risk environment, historical data alone is not sufficient for determining fair, accurate insurance premiums. According to Cal Fire, five of the largest wildfires in the state’s history have occurred since 2017.
The state’s evolving risk profile, combined with the underwriting and pricing constraints imposed by Proposition 103, has led to rising premium rates and, in some cases, insurers deciding to limit or reduce their business in the state.
With fewer private insurance options available, more Californians have been resorting to the state’s FAIR Plan, which offers less coverage for a higher premium. This isn’t a tenable situation.
“Put simply, increasing the number of policyholders in the FAIR Plan threatens the solvency of insurance companies in the voluntary market,” California Insurance Commissioner Ricardo Lara explained to the State Assembly Committee on Insurance. “If the FAIR Plan experiences a massive loss and cannot pay its claims, by law, insurance companies are on the hook for the unpaid FAIR Plan losses…. This uncertainty is driving insurance companies to further limit coverage to at-risk Californians.”
“Including the use of catastrophe modeling in the rate making process will help stabilize the California insurance market,” said Janet Ruiz, Triple-I’s California-based director of strategic communication. “Homeowners in California will be able to better understand their individual risk and take steps to strengthen their homes.”
The new measure also requires major insurers to increase the writing of comprehensive policies in wildfire-distressed areas equivalent to no less than 85 percent of their statewide market share. Smaller and regional insurance companies must also increase their writing.
Requirements for insurers
It also requires catastrophe models used by insurers to account for mitigation efforts by homeowners, businesses, and communities – something not currently possible under existing outdated regulations today.
Moves like this by state governments – combined with increased availability of more comprehensive and granular data tools to inform underwriting and mitigation investment – will go a long way toward improving resilience and reducing losses.
The efficacy of collaboration and investment by “co-beneficiaries” in resilience initiatives was a dominant theme throughout Triple-I’s 2024 Joint Industry Forum – particularly in the final panel, which celebrated leaders behind recent real-world impacts of such investments.
Moderated by Dan Kaniewski, Marsh McLennan (MMC) managing director for public sector, the panelists discussed how their multi-industry backgrounds inform their innovative mindsets, as well as their knowledge on the profound ripple effects of targeted resilience planning.
The panel included:
Jonathan Gonzalez, co-founder and CEO of Raincoat;
Bob Marshall, co-founder and CEO of Whisker Labs;
Dawn Miller, chief commercial officer of Lloyd’s and CEO of Lloyd’s Americas; and
Lars Powell, director of the Alabama Center for Insurance Information and Research (ACIIR) at the University of Alabama and a Triple-I Non-Resident Scholar.
Productive partnership
Kaniewski – who spent most of his career in emergency management, previously serving as the second-ranking official at the Federal Emergency Management Agency (FEMA) and the agency’s first deputy administrator for resilience – kicked off the panel by raising the question “how do we define success?”
He characterized success as “putting theory into practice” and “having elected officials taking steps to reduce risk and transfer some of this risk from federal, state, or local taxpayers.”
But, as participants in earlier panels and this one made clear, government efforts can only go so far without private-sector collaboration.
“It doesn’t matter who makes that investment, whether it’s the homeowner, the business owner, or the government,” Kaniewski explained. “The reality is we all benefit from that one investment. If we can acknowledge that we benefit from those investments, we should do our best to incentivize them.”
Kaniewski and Raincoat’s Gonzalez were both integral in the development of community-based catastrophe insurance (CBCI), developed in the wake of Superstorm Sandy in 2012.
“A lot of the neighborhoods that experienced flooding due to Sandy didn’t have access to insurance prior to the flooding – and then, post flooding, the government really had to step up to figure out how to keep those families in those houses,” Gonzalez said.
In collaboration with the city, a nonprofit called the Center for NYC Neighborhoods developed the concept of buying parametric insurance on behalf of these communities, with any payouts going toward helping families stay in their homes after disasters. Unlike traditional indemnity insurance, a parametric policy pays out if certain agreed-upon conditions are met – for example, a specific wind speed or earthquake magnitude in a particular area – regardless of damage. Parametric insurance eliminates the need for time-consuming claim adjustment. Speed of payment and reduced administration costs can ease the burden on both insurers and policyholders.
In this case, Kaniewski said, success was reflected in the fact that the pilot program received sufficient funding not only for renewal but expansion, bringing needed protection to even more vulnerable communities.
Powell reinforced this sentiment in explaining ACIIR’s research on the FORTIFIED method, a set of voluntary construction standards created by the Insurance Institute for Business and Home Safety (IBHS) for durability against severe weather. The insurance industry-funded Strengthen Alabama Homes program issues grants and substantial insurance premium discounts to homeowners to retrofit their houses along these guidelines, prompting multiple states to replicate the program.
Such homes in Alabama sustained 54 to 76 percent reduced loss frequency from Hurricane Sally compared to standard homes, Powell reported, and an estimated 65 to 73 percent could have been saved in claims if standard homes were FORTIFIED.
Incentivizing contractors to learn FORTIFIED standards was especially critical, Powell explained, because they further advertised these skills and expanded the presence of FORTIFIED homes beyond the grant program.
“A lot of companies have said for several years, ‘we don’t know if we’re comfortable writing these…we haven’t seen it on the ground,’” Powell said. “Well, now we’ve seen it on the ground. We need to have houses that don’t burn down or blow over. We know how to do it, it’s not that expensive.”
Addressing concerns to drive adoption
Miller described how Lloyd’s Lab works to ease that discomfort by creating a space for businesses to nurture and integrate novel insights and products without fear. With mentor support, companies are encouraged to test new ideas while free from the usual degree of financial and/or intellectual property risks attached to innovation investments.
“It’s about having an avenue out to try,” Miller said. “Having that courage, as we continue to work together, to try to understand what’s working, what’s not, and being brave to say, ‘this isn’t working, but we can course correct.’”
Whisker Labs’ Marshall noted that numerous insurance carriers have taken a chance on his company’s front-line disaster mitigation devices, Ting, by paying for and distributing them to their customers.
Ting plug-in sensors detect conditions that could lead to electrical fires through continuous monitoring of a home’s electrical system. Statistically preventing more than 80 percent of electrical fires, communities benefit – not only by preventing individual home fires but also by providing data about the electrical grid and potentially heading off grid-initiated wildfires.
“There are so many applications for the data,” Marshall said, but “to have a true impact on society…we have to prove that we’re preventing more losses than the cost, and we have to do that in partnership with insurance carriers.”
Everyone wins if everyone plays
Cultivating innovative solutions is pivotal to enhancing resilience, the panelists agreed – but driving them forward requires more than just the insurance industry’s support.
He pointed to a project last year – funded by Fannie Mae and developed by the National Institute of Building Science (NIBS) – that culminated in a roadmap for resilience investment incentives, focusing on urban flooding.
The co-authors of the project, including Triple-I subject-matter experts, represented a cross-section of “co-beneficiary” groups, such as the insurance, finance, and real estate industries and all levels of government, Kaniewski said.
Implementation of the roadmap requires participation from communities and multiple co-beneficiaries. Triple-I and NIBS are exploring such collaborations with potential co-beneficiaries in several areas of the United States.
Triple-I recently kicked off a new webinar series featuring its Non-Resident Scholars. The first episode focused on the rising severity of natural catastrophes and innovative data initiatives these scholars are engaged in to help mitigate the impact of these perils.
Moderated by Triple-I’s Chief Economist and Data Scientist Michel Léonard, the panel included:
Phil Klotzbach, Senior Research Scientist in the Department of Atmospheric Science at Colorado State University;
Victor Gensini, meteorology professor at Northern Illinois University and leading expert in convective storm research;
Seth Rachlin, social scientist, business leader, and entrepreneur currently active as a researcher and teaching professor; and
Colby Fisher, Managing Partner and Director of Research and Development at Hydronos Labs.
“Wild and crazy”
Klotzbach discussed “the wild and crazy 2024 Atlantic hurricane season,” which he called “the strangest above-normal season on record.”
Abnormally fluctuating periods of activity this year created “a story of three hurricane seasons,” reflecting a broader trend of decreasing storm frequency and increasing storm severity, Klotzbach said.
While Klotzbach and his forecasting team’s “very aggressive prediction for a very busy season” was validated by Hurricane Beryl’s landfall as the earliest Category-5 hurricane on record — followed by Debbie and Ernesto — “we went through this period from August 20 to September 23 where we had almost nothing. It was extremely quiet.”
After extensive media coverage claiming the forecasts were a “massive bust,” along came Hurricane Helene, which developed into the “strongest hurricane to make landfall in the Big Bend of Florida since 1851.” Helene drove powerful, destructive flooding inland – most notably in Asheville, NC, and surrounding communities. Then came Hurricane Milton which was noteworthy for spawning numerous fatal tornadoes.
“Most tornadoes that happen with hurricanes are relatively weak – EF0, EF1, perhaps EF2,” Gensini – the panel’s expert on severe convective storms (SCS) – added. “Milton had perhaps a dozen EF3 tornadoes.”
Costly and underpublicized
Severe convective storms – which include tornadoes, hail, thunderstorms with lightning, and straight-line winds – accounted for 70 percent of insured losses globally the first half of 2024. And in 2023, U.S. insured SCS-caused losses exceeded $50 billion for the first time on record for a single year.
Hailstorms are especially destructive, behind as much as 80 percent of SCS claims in any one year. Yet their relative brevity and limited scope compared to large-scale disasters earns them far less public and industry attention.
“We haven’t had a field campaign dedicated to studying hail in the United States since the 1970s,” Gensini explained, “so it’s been a long time since we’ve had our models updated and validated.”
Data-driven solutions
To rectify this knowledge gap, the In-situ Collaborative Experiment for the Collection of Hail in the Plains (or ICECHIP) will send Gensini and some 100 other scientists into the Great Plains to chase and collect granular data from hailstorms next year. Beyond developing hail science, their goal is to improve hail forecasting, thereby reducing hail damage.
Gensini pointed to another project, the Center for Interdisciplinary Research on Convective Storms (or CIRCS), which is a prospective academic industry consortium to develop multidisciplinary research on SCS. Informed by diverse partnerships, such research could foster resilience and recovery strategies that “move forward the entire insurance and reinsurance industry,” he said.
Rachlin and Fisher echoed this emphasis on enhancing the insurance industry’s facilitation of risk mitigation in their presentation on Hydronos Labs, an environmental software development and consulting firm that utilizes open-source intelligence (OSINT).
The costs and variability of climate and weather information have created “a data arms race” among insurance carriers, and aggregating and analyzing publicly available information is an untapped solution to that imbalance, they explained.
The company’s end goal, Rachlin added, is to promote an insurance landscape centered around “spending less money on [collecting] data and more money using data.”
All panelists stressed the ongoing need for more reliable, comprehensive data to steer industry strategies for effective mitigation. Investments in this data now are less than the costs of post-disaster recovery that will continue to plague more and more communities in our rapidly evolving climate.
Register here to listen to the entire webinar on demand.
