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Addressing the Insurance Crisis Through Property Resilience

In May, State Farm announced they will no longer provide home insurance to new California customers due to wildfire risks and increase in construction costs. Then in July, Farmers Insurance announced that they will stop offering policies in Florida due to the rising costs of covering properties in a hurricane-prone state.

This underscores a trend caused by the rise in claims due to natural catastrophes. As a result of escalating concerns regarding risks posed by climate change, insurers and lenders are developing a heightened sensitivity to the potential ramifications posed by such events. The withdrawal of larger insurance companies from certain markets has left property owners in a scramble to secure coverage since property insurance is required by lenders. But despite the exorbitant premiums (Florida’s commercial property rates may increase more than 40% in 2023), there is no assurance that insurance providers will deliver payouts in the aftermath of a natural disaster.

Logic dictates that the insurance industry should take a more proactive approach by requiring and incentivizing property owners and investors to increase the resiliency of properties and reduce the risk of financial loss from extreme climate events. Increasing resiliency reduces financial risk to insurance agencies and investors and could allow insurance companies to insure properties that otherwise might not meet their risk criteria. However, insurers are slow to take this approach, and property owners continue to struggle to find a carrier or pay higher premiums.

Historic Data vs. Forward-looking Approach

Insurers’ current approach towards properties is reactive and in response to past climate events, as their models have traditionally been based on outdated historical data. While some insurers are incorporating climate risk modeling, which considers potential risks from climate hazards in the future, a notable challenge arises from the fact that long-term climate risk models are based on historical data that needs regular updating. A 2022 report co-authored by LaSalle and the Urban Land Institute (ULI) highlighted that software companies and risk analytics firms utilizing similar data sets may offer varying and inconsistent long-term climate risk assessments for the same asset.

For greater accuracy, insurers must expand their focus beyond a macro view of climate patterns and consider localized climatic conditions, building designs, and mitigation programs. For example, Partner Energy’s technical partner, National Flood Experts, has been working with property owners to reduce their flood insurance premiums by conducting property-specific research and Flood Expert Surveys that help qualify properties for Letter of Map Amendments (LOMA), which removes properties from high-risk flood zones, thereby lowering the flood insurance premium. This approach of looking at localized conditions, while limited by historic data, has assisted in not only lowering premiums but even helping to make properties insurable that were initially deemed by the insurer as uninsurable.

Incorporating property-specific resilience measures into insurance risk assessments requires a reevaluation of underwriting guidelines and pricing models. This notion is substantiated by FEMA’s Building Codes Save Study, which revealed that adopting International Codes or similar buildings codes with a focus on mitigating flood, earthquake, and hurricane/wind risks has resulted in savings of $1.6 billion every year in the United States since 2000. This emphasizes the tangible benefits of integrating climate hazard resilience measures.

Advantages of Adopting Property Resilience Measures

While insurance policies and premiums may require time to catch up with property-specific resiliency efforts, property owners and investors should consider proactively upgrading their properties. Properties that incorporate resilient construction methods or have been retrofitted to reduce potential climate impacts, could reduce potential post-disaster damages, leading to less downtime and higher valuation, and may realize lower insurance premiums.

Obtaining a property resilience assessment is the first step, whereby a sustainability and resiliency expert conducts an on-site inspection to detect risks specific to the property and recommend site-specific measures for reducing those risks. For example, a property in a wildfire-prone area is at greater risk when there is dry vegetation around the property, but being aware of this and removing the vegetation would reduce possible kindling materials, thus reducing the risks from wildfires.

Incorporation of measures such as structural retrofits, upsizing catch basins and stormwater drainage systems, and installing wildfire defense systems, will fortify properties against potential damages. In addition to physical upgrades to a property, it is also important to have an emergency response plan intact so property owners and managers can react quickly in the event of a climate event, such as knowing who to call and what to do in order to procure resources to mitigate damages.

While upgraded properties may not escape completely unscathed after a climate event, damages, operational downtime, and the associated insurance premiums could be reduced.


We are beginning to see insurers consider resilience factors when underwriting an asset, however there is a long way to go before this becomes standard practice. There may not be a clear answer yet on how insurers will account for property resilience measures in their underwriting, but it would be beneficial for owners and investors to adopt building resiliency design and program measures now. As risks from climate hazards continue to intensify, the advantages of resiliency measures are evident and will provide a return on investment for investors and a larger pool of insurable properties for insurance providers. To get started on a property resilience assessment as part of due diligence or as standalone service, consult with a sustainability expert at Partner Energy.

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