Reframing Insurability as Investability

The rising frequency and intensity of extreme weather events, like the Los Angeles wildfires and the catastrophic floods in Kerr County, Texas, are changing our perspectives on insurance, risk management, and investment. These events repeatedly highlight the vulnerability of communities, governments, and businesses to severe financial risks stemming from physical climate hazards. This situation emphasizes the urgent need for resilience solutions, including risk-transfer strategies.

Increasingly, we are facing more frequent and severe climatic weather events like floods, wildfires, and the like, that cause serious damage to our homes and communities. In recent decades, the time between billion-dollar disasters has decreased, while the average number of these events has increased. In the 1980s, there was a billion-dollar event roughly every 82 days, and in 2025, there was one roughly every 10 days, according to Climate Central. Last year, the U.S. experienced 23 separate severe weather and climate disasters, each causing at least $1 billion in damage, totaling over $100 billion in losses.

And insurers are taking note.

The connection between insurability (the ability to obtain insurance coverage or do so at a reasonable cost) and investability (the attractiveness of assets, like a home, to lenders and investors) is becoming both more apparent as severe weather events increase in intensity and severity.

It is essential for homeowners, businesses, and communities to understand this connection to adequately manage their risks and investments, and perhaps most importantly, work together to find innovative solutions to face the challenges ahead.

The total costs associated with risks are expected to keep rising unless substantial measures are implemented to address current vulnerabilities and enhance resilience strategies. A holistic approach to risk management provides a promising solution by effectively quantifying, financing, and mitigating risks in a coordinated manner. This strategy not only boosts resilience but also ensures the ongoing viability and financial stability of the insurance industry.

Addressing climate risk with a holistic and collaborative approach

Addressing rising climate risks requires a holistic approach to risk management. This means quantifying, financing, and mitigating risks in a coordinated way that enhances resilience at both the asset and system levels. It involves collaboration among insurers, investors, architects, engineers, developers, policymakers, product innovators, and communities.

Frameworks like our "How a Holistic Risk Approach Increases Resilience" and our Marsh Adaptation Framework provides blueprints for integrating risk management strategies that build resilience across homes, neighborhoods, ecosystems, and critical infrastructure.

These frameworks help homeowners and businesses alike navigate the nuances of insurance markets. While residential property markets in some peril-prone regions face clear insurance affordability challenges, commercial insurance markets present a more nuanced picture. Marsh, for example, is working with businesses on adaptation-linked insurance to ensure they are rewarded for resilience incentives.

While investment in resilience for homeowners, businesses, and governments may appear to be an upfront cost, it has been proven to save money by reducing or avoiding losses. Research consistently shows that investing in resilience yields significant returns. Every dollar invested in climate resilience and preparedness saves communities approximately $13 in damages, cleanup, and economic disruption.

These figures make a compelling case for treating mitigation investments as risk-reducing expenditures. Such investments improve asset risk profiles, which may lead to lower insurance premiums and greater access to capital for our homes, our communities, and our businesses.

Insurability is the cornerstone of our communities.

Insurance may not be as tangible or visible as a newly built home, but it is a cornerstone of economic stability for our communities. It works by pooling risk, allowing the losses of a few to be covered by the many. This invisible safety net not only protects homeowners and businesses but also “de-risks” investments, making new builds, upgrades, retrofits, and holding assets backable and bankable. Additionally, insurance secures a quick recovery in the event of a loss, helping to keep disruptions and losses to a minimum. However, insurance only functions well when risks are managed appropriately.

Right now, that balance is being tested. We see the warning signs in peril-prone markets like California, a place where 12 insurers have limited new policies in the state in response to the devastating wildfires and their own risk appetite. This, in turn, has left some homeowners with no good choices for insurance.

Insurability is not an isolated issue; it is a downstream consequence of how well risks are managed and mitigated. Our team believes we may be able to better mitigate and manage the underlying risks upfront to create a more secure and stable marketplace for our clients and our communities.

Resilient assets are insurable and investable.

Effective risk management reduces the underlying risks to assets such as homes, commercial properties, and critical infrastructure. Risk reduction improves the total cost of risk, making more insurance and finance options available.

Our Risk Advisory team regularly advises clients on the ways in which they may wish to prepare and protect their homes for the unique risks inherent to their properties today and into the future. The changes are then contemplated in our risk models and those of insurers, enhancing the risk profile and insurability of the underlying assets.

We have stories of rural mountain homes in Montana that were unable to get insurance before working with us and then received multiple fair-value offers after doing so, and stories of homes in the canyons of Southern California that, despite their peril-prone location, were able to survive the devastating wildfires of 2025 due to effective risk mitigation measures that had been implemented.

Insurance Innovations: Embedding resilience into insurance products

One insurance innovation comes in the form of a resilience catastrophe bond from our partner company, Guy Carpenter, issued by the North Carolina Insurance Underwriting Association (NCIUA) in 2025. The bond is the first transaction to not only provide financial protection against natural catastrophe events but also to integrate disaster resilience features, enabling new private sources of funding to support risk management measures. While the bond offers financial protection against storms rather than floods, it has potential application much more widely following this groundbreaking placement. The $600 million Resilience Catastrophe Bond, the first of its kind globally, links storm-resilient construction with financial markets, and supports the installation of FORTIFIED roofs, which are engineered to withstand severe hurricanes and could cut damage claims by up to 35%.

This system helps NCIUA protect policyholders and strengthen their roofs through this program.

Another innovative example is a pilot program in New York City, using parametric flood insurance to provide rapid financial support to low- and moderate-income communities after major flood events. The initiative was led by the Center for NYC Neighborhoods (CNYCN), in partnership with several city agencies and organizations including the Environmental Defense Fund, and supported by reinsurance firm Swiss Re, broker Guy Carpenter and insurtech ICEYE.

The program leverages ICEYE’s innovative parametric trigger, which combines satellite data, real-time sensors, and social media images to quickly determine the extent of flooding. When certain flood parameters are met, insurance payouts are made to CNYCN, which then distributes grants of up to $15,000 to qualifying households for emergency needs.

For lenders and investors, these types of improved properties translate into greater confidence and more financing options. When assets are resilient, they are more investable. This dynamic helps maintain a well-functioning macroeconomic system where capital flows to sustainable, lower-risk opportunities naturally.

But beyond creating new ways of financing resilience or embedding resilience in underwriting, there is also a clear benefit to building back better to match the growing threat of climate risk. 

This was the subject of conversation at COP30, the 30^th annual United Nations Climate Change Conference, where the “House of Insurance” platform was launched, bringing together insurers, governments, businesses, and non-governmental organizations (NGOs) to highlight how to support a more resilient and low-emission economy. Ideas from improved risk modeling, like new flood models in Brazil, to catastrophe-linked insurance products, to a build back better approach, were put forth. The conversation also highlighted a "build-back-better" approach, which advocates for rebuilding to higher resilience standards after a disaster, as seen in programs like FORTIFY.

The insurance industry now has the opportunity to evolve from a traditional claims payer to a proactive architect of resilience, recognizing it as both a competitive advantage and a necessity for a stable insurance marketplace and sustainable business outlook. Insurers can take on a role beyond merely regulating damage; they are pivotal in navigating these changing risks for clients, businesses, and communities alike.

Practical steps to investability and insurability

Organizations should consider taking four practical steps to enhance both investability and insurability.

1. Leverage climate analytics: Use data-driven tools to understand how assets perform under various climate scenarios and identify vulnerabilities.

2. Implement risk-mitigation engineering: Adopt building and retrofit standards to reduce exposure to hazards such as flooding, wildfires, and hurricanes.

3. Embed resilience in insurance placement: Seek insurance products that reward resilience measures, such as sustainability-linked insurance policies that tie premiums to risk reduction efforts.

4. Explore innovative solutions: Consider alternative risk transfer mechanisms, including parametric insurance and captive insurance, to manage residual risks.

Homeowners and communities should consider how to best prepare for and mitigate the risks specific to their properties. If you live in an area prone to wildfires, simple actions such as creating defensible space and adding ember-resistant vents may significantly protect your home. Start with one or two improvements or retrofits; for instance, if you live in a coastal area or “Tornado Alley,” replace your garage door with one that is rated for wind. This one action could significantly improve how your home performs in a storm event. Our team of risk advisors provides recommendations based on different types of perils in this guide. They are also available for on-site support and offer tailored advice for your unique situation.

Public-private partnerships

But homeowners and businesses shouldn’t be left to face the challenges of mitigating risks alone. No single sector will solve them. Public-private partnerships are essential, alongside strong building codes and infrastructure management, to lower the upfront costs of resilience upgrades, expand access to financing, and create market signals that encourage investment in safer, more resilient assets.

Resilient design requires a range of sectors working together—from architects and engineers who build for the future we face to modern building codes that stand up to our changing climate. Accurate risk-adjusted pricing of risks that have been improved makes these assets more attractive to insurers.

Successful models from other industries, such as automotive safety, demonstrate how aligned incentives among manufacturers, regulators, insurers, and consumers drive widespread adoption of risk-reducing standards.

By aligning research, data, capital, and policy, we may shift from rebuilding after disasters to investing in a safer, more resilient future. This shift will preserve insurability, enhance investability, and protect communities and economies from the growing impacts of climate change—and investment in resilience is 13x more efficient than dollars directed to recovery post-event. Not every event needs to be a disaster.

From the perspectives of climate, resiliency, and insurance literacy, it is essential for key stakeholders to educate the public on the fact that insurance is a risk-adjusted asset. The availability and affordability of insurance will depend on factors such as the location where individuals purchase their homes, the specific hazards associated with that area, and the proactive measures they and their communities take to retrofit and construct buildings that meet established standards of resiliency.

To explore how Marsh and Marsh McLennan Agency Private Client Services could help you enhance your own climate resilience and navigate the evolving insurance landscape, explore our capabilities, watch our on-demand Risk and Resiliency Symposium,  and follow our ongoing partnership with the World Economic Forum as we advance the conversation on insurability and climate risk. We are just getting started!