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Eine Nutzung ist nur im urheberrechtlich zulässigen Rahmen erlaubt.","text":"I\r\nSafeguarding Home \r\nInsurance: Reducing \r\nexposure and vulnerability \r\nto extreme weather\r\nMay 2025\r\n\r\nII\r\n\r\nMaryam Golnaraghi\r\nDirector Climate Change & Environment  \r\nGeneva Association \r\nZhelyan Vichev\r\nJunior Researcher, Climate Change & Environment \r\nGeneva Association\r\nSafeguarding Home \r\nInsurance: Reducing \r\nexposure and vulnerability \r\nto extreme weather\r\n\r\n2\r\nGeneva Association\r\nThe Geneva Association was created in 1973 and is the only global association of \r\ninsurance companies; our members are insurance and reinsurance Chief Executive \r\nOfficers (CEOs). Based on rigorous research conducted in collaboration with our \r\nmembers, academic institutions and multilateral organisations, our mission is to \r\nidentify and investigate key trends that are likely to shape or impact the insurance \r\nindustry in the future, highlighting what is at stake for the industry; develop \r\nrecommendations for the industry and for policymakers; provide a platform to our \r\nmembers and other stakeholders to discuss these trends and recommendations; \r\nand reach out to global opinion leaders and influential organisations to highlight \r\nthe positive contributions of insurance to better understanding risks and to building \r\nresilient and prosperous economies and societies, and thus a more sustainable world.\r\nGeneva Association publications:\r\nPamela Corn, Director Communications\r\nHannah Dean, Editor & Content Manager\r\nJooin Shin, Digital Content & Design Manager\r\nSuggested citation: Geneva Association. 2025.\r\nSafeguarding Home Insurance: Reducing exposure \r\nand vulnerability to extreme weather. \r\nAuthors: Maryam Golnaraghi and Zhelyan Vichev. May. \r\n© Geneva Association, 2025 All rights reserved\r\nwww.genevaassociation.org\r\nPhoto credits:  \r\nCover page – Unsplash+\r\n\r\nForeword \r\n5\r\nExecutive summary \r\n6\r\n1. The rising insurance challenge \r\n10\r\n1.1.\t Economic and insured losses related to extreme weather\t\r\n10\r\n1.2.\t The protection gap\t\r\n13\r\n1.3.\t The critical role of risk-based insurance pricing\t\r\n17\r\n1.4.\t Insurance availability and affordability challenges in specific regions\t\r\n17\r\n1.5.\t Aims and structure of the report\t\r\n21\r\n2. Socioeconomic drivers of property risks related to extreme weather \r\n23\r\n2.1.\t Rising exposure and vulnerability\t\r\n23\r\n2.2.\t Rising cost of rebuilding\t\r\n25\r\n3. Stakeholder impacts on exposure and vulnerability \r\n27\r\n3.1.\t Homeowners\t\r\n28\r\n3.2.\t Communities\t\r\n29\r\n3.3.\t Governments\t\r\n30\r\n3.4.\t Developers and contractors\t\r\n31\r\n3.5.\t Public and private infrastructure owners and utilities\t\r\n31\r\n3.6.\t Other specialised agencies\t\r\n31\r\n3.7.\t Credit rating agencies\t\r\n31\r\n3.8.\t Property valuation, mortgage, and lending stakeholders\t\r\n32\r\n3.9.\t Market-based insurance stakeholders\t\r\n36\r\n3.10. Government-backed insurance pools\t\r\n37\r\n3.11.\tInsurance regulators\t\r\n38\r\n4. Reducing risks by investing in local resilience \r\n40\r\n4.1.\t Tier I: Scale up targeted local resilience measures\t\r\n40\r\n4.2.\t Tier II: Implement structural changes to valuation and mortgage systems to impact  \r\nhomeowner decisions\t\r\n45\r\n5. Challenges ahead \r\n49\r\nAppendices \r\n50\r\nAppendix 1: Projected increases in the frequency and severity of floods and wildfires\t\r\n50\r\nAppendix 2: Litigation cases brought against local governments and agencies\t\r\n51\r\nAppendix 3: Government-owned or -subsidised insurance schemes\t\r\n52\r\nReferences \r\n56\r\nContents\r\n\r\n4\r\nACKNOWLEDGEMENTS\r\nThis report benefitted from the contributions of the project’s advisory committee (and other \r\nleading experts from its respective organisations), made up of Geneva Association (GA) member \r\ncompanies, insurance associations, think tanks, law firms, engineering companies, and academic \r\ninstitutions: \r\n•\t Gijs Kloek (Achmea)\r\n•\t Jessica Beakbane, Lena Fuldauer, Markus Stowasser, and Yassine Iferden (Allianz)\r\n•\t Ethan Aumann and Dave Snyder (American Property & Casualty Insurance Association)\r\n•\t Hélène Chauveau, Christopher Fasser, and Maria Diaz Hurtado (AXA/AXA XL)\r\n•\t Silke Dierer, Sophie Wilson, and Pierre-Adrien Opinel (AXIS Capital)\r\n•\t Margaret Peloso and Amelie Fava-Verde (Chubb)\r\n•\t Nigel Brook and Wyne Lawrence (Clyde&Co)\r\n•\t Rui Esteves, Augusto Tomé Pedroso, and Sandra Guilherme (Fidelidade)\r\n•\t Gerardo Di Filippo, Francesca Monti, and Alessandra Querin (Generali)\r\n•\t Jörg Steffensen, Andreas Märkert, and David Terán (Hannover Re)\r\n•\t Clare Cordingley (IAG)\r\n•\t Alix Pearce, Ange Nichols, and Duncan Sheppard (Insurance Council of Australia)\r\n•\t Roy Wright, Jennifer Gardner, and Michael Newman (Insurance Institute for Business and Home \r\nSafety)\r\n•\t Blair Feltmate (Intact Centre on Climate Adaptation)\r\n•\t Constantine Tsolakidis (Interamerican Hellenic Insurance)\r\n•\t Alain Lessard and Patrick Khalil (Intact Financial Corporation)\r\n•\t Rakhi Kumar and Amy Wixon (Liberty Mutual)\r\n•\t Swenja Surminski (London School of Economics)\r\n•\t John Anderson, Kimberly Highfield, and William Shields (Manulife)\r\n•\t Antonio Ruiz and Javier Fernandez (MAPFRE)\r\n•\t Andreas Lang, Jeremy Mathis, Thomas Krismer, Bonnie Guth, Farnaz Mahdavian, and Tobias \r\nGrimm (Munich Re)\r\n•\t Edward Mishambi and Craig Tillman (Renaissance Re)\r\n•\t Penny Liao (Resource for the Future)\r\n•\t Tamara George and Nicholas Dodd (RMI)\r\n•\t Michele Lacroix (SCOR)\r\n•\t Bob Watkins, Sara Amatuzio, and Larry Stevig (State Farm)\r\n•\t Gillian Rutherford-Liske, Balz Grollimund, Dominik Renggli, Miguel Senac Gayarre, Shailee \r\nPradhan, Lucia Bevere, and Maurice Skelton (Swiss Re)\r\n•\t Xiaobin Cao, Wataru Kawaguchi, Tomo Asaka (Tokio Marine)\r\n•\t Joachim Meister, and Bernardo Meizoso (Worley).\r\nWe are also grateful to the following experts from the climate risk modelling firms, the mortgage and \r\nlending sectors, financial regulatory communities, and international organisations for sharing their \r\nknowledge:\r\nToni Moss (AmeriCatalyst LLC and EuroCatalyst BV); Suzanne Smith (Australian Prudential \r\nRegulation Authority); Kemal Ercevik (Bank of England); Angelos Plataniotis (Bank of Greece); \r\nRicardo Lara and Mike Peterson (California Department of Insurance); Steve Mennill (Canada \r\nMortgage and Housing Corporation); Alex Borkowski and George Bradner (Connecticut Insurance \r\nDepartment); Jocelyn Laflamme and Louis-François Poirier (Dejardines); Dave Burt (DeltaTerra \r\nCapital); Marie Scholer (European Insurance and Occupational Pensions Authority); Daniel Coates \r\n(formerly of the Federal Housing Finance Agency); Achim Duebel (Finpolconsult); Jeremy Porter \r\n(First Street); Ryan Vaughn (Freddie Mac); Alistair Gough, Hanne van Voorden, Joe Perry, Miroslav \r\nPetkov, and Hison Wong (International Association of Insurance Supervisors); Ommid Saberi \r\nand Jan Mumenthaler (International Finance Corporation); Julia Dreier (Minnesota Department \r\nof Insurance); Ned Tyrrell (National Association of Insurance Commissioners); Alice Kane, \r\nChristian Myers, Melissa Robertson, and Timothy Vigil (New Mexico Office Of the Superintendent \r\nof Insurance); Stephane Tardif (Office of the Superintendent of Financial Institutions); Aris \r\nPapadopoulos (Resilience Action Fund); Ron Dembo and Andrew Wiebe (RiskThinking.AI); Jay \r\nBruns (Washington State Office of the Insurance Commissioner).\r\nIn addition, the report benefited from discussions at the GA’s 2024 PROGRES Seminar and 2024 \r\nClimate Change & Environment Conference. \r\nFinally, we extend our deepest thanks to the GA’s Climate Change & Environment Working Group, \r\nthe Editorial Committee, the GA Associates, and Dennis Noordhoek (Geneva Association), for their \r\nsupport and feedback. \r\n\r\n5\r\nForeword\r\nThere are moments in the arc of our collective experience when slow-building chal-\r\nlenges evolve into defining tests of resilience. The accelerating impacts of extreme \r\nweather are not distant forecasts or theoretical models – they are now shaping the \r\nlives, livelihoods, and futures of millions across the globe. From scorched hillsides \r\nto flooded city blocks, the consequences of inaction echo louder each season. As \r\nthese events grow in frequency and severity, we must move beyond reaction and \r\ninto readiness – socially, structurally, and financially.\r\nThis report examines a sobering reality: while insured losses from extreme weather \r\nevents have exceeded USD 100 billion every year since 2020, a staggering propor-\r\ntion of the damage remains uncovered. The gap between economic and insured \r\nlosses – the protection gap – exposes profound vulnerabilities, especially in regions \r\nlike Africa and Asia where insurance penetration remains limited. Meanwhile, in the \r\nabsence of risk-based pricing, concerns around the availability and affordability of \r\nproperty insurance are mounting even in advanced economies.\r\nInsurance is not merely a financial product; it is a foundation for resilience. It pro-\r\ntects households and businesses from catastrophic loss, enables faster recovery, \r\nand supports economic continuity. Yet, the systems that rely on insurance – from \r\nmortgage markets to infrastructure investment – often overlook the risks that threat-\r\nen them. These systems are not evolving to keep pace with changing risks. \r\nThis study offers a roadmap for systemic resilience. It recognises the power of local \r\ndecisions, the responsibility of public and private institutions, and the necessity of \r\ncollaboration. I invite industry leaders, policymakers, and community stakeholders to \r\nexplore the findings with urgency and resolve – because resilience, while an ambi-\r\ntious goal, begins with the choices we make today.\r\nJad Ariss\r\nManaging Director\r\nGeneva Association\r\n\r\n6\r\nExecutive summary\r\nGlobally, insured losses from extreme weather events \r\nhave been rising over the last three decades. While they \r\nvary significantly from year to year, hurricanes, floods, \r\nwildfires, and severe convective storms have driven \r\ninsured losses to over USD 100 billion every year since \r\n2020, with expectations that they will surpass USD 200 \r\nbillion in 2025. \r\nThis has largely been driven by socioeconomic factors \r\nthat increase the exposure and vulnerability of assets to \r\nextreme weather. These include land zoning practices \r\nthat allow building in hazard-prone regions, outdated \r\nbuilding codes, rapid urban densification, increasing \r\nwildland-urban interfaces, destruction of natural \r\necosystems, ageing infrastructure, and utilities’ oper-\r\nations. Increasing costs of rebuilding due to inflation, \r\nsupply chain disruption, and higher labour costs are \r\nfurther intensifying losses.\r\nSocioeconomic choices such as land-\r\nuse decisions, dated building codes, \r\nand urbanisation amplify exposure and \r\nvulnerability to extreme weather.\r\nThe protection gap – the proportion of total economic \r\nlosses that is uninsured – for weather-related extremes \r\nvaries significantly among regions. On average, North \r\nAmerica and Oceania/Australia have the lowest protec-\r\ntion gap, while Africa and Asia experience the highest. \r\nVarious factors, including low risk awareness, reliance \r\non post-disaster government aid, misperception of risk, \r\nand a lack of financial education and risk management \r\nculture, contribute to this protection gap. \r\nInsurance provides financial protection against natural \r\ncatastrophes, accelerates recovery after a disaster, \r\nand reduces the burden on taxpayers. High insurance \r\npenetration therefore helps countries and communities \r\nmanage the economic fallout of disasters more effec-\r\ntively. Though property & casualty (P&C) re/insurers are \r\nfirst in line when it comes to helping society cope with \r\nthe financial impacts of extreme weather, they face rising \r\nrisks driven by the decisions of various stakeholders that \r\naffect the vulnerability and exposure of properties. The \r\nindustry invests in research to explore risk drivers and \r\nhas been promoting the need for risk-based insurance \r\npricing, which aligns premiums with actual risks, taking \r\nproperty exposure, vulnerability, and the likelihood of \r\nextreme weather events into account. This encourages \r\ninvestment in risk prevention and promotes fairness by \r\ncharging higher premiums for higher-risk properties. \r\nRe/insurers remain society’s first \r\nfinancial responders after disasters.\r\nThis report examines the housing sectors in advanced \r\neconomies – Australia, Canada, the EU, Japan, and \r\nthe US – where rising exposure and vulnerabilities to \r\nextreme weather in some localities are driving insurance \r\navailability and affordability challenges. For example, \r\nin Australia, 15% of properties face affordability stress, \r\nwhile in some parts of the US and Canada, rising risks \r\nand regulatory pressures to cap premiums have forced \r\ninsurers to limit or cease coverage for some perils. \r\nMarket participants in Europe have called for the need \r\nfor higher insurance premiums for major weather-re-\r\nlated events like wildfires. \r\nBut challenges to insurance availability \r\nand affordability are increasing in some \r\nregions.\r\nIt considers how stakeholders involved in the land \r\nmanagement, building, regulation, construction, lending, \r\ninsurance, and risk management sectors, as well as \r\nThis report highlights how socioeconomic \r\nfactors exacerbate extreme weather risks \r\nand calls for an all-of-society approach to \r\nenhance local resilience.\r\n\r\n7\r\nhomeowners, impact exposure and vulnerability to \r\nextreme weather at the property and local levels. For \r\nexample, homeowners often choose to live in areas \r\nbased on cost of living and/or quality of life rather than \r\nconsidering extreme weather risks or insurance availa-\r\nbility and affordability. Local governments may approve \r\nconstruction in hazard-prone regions due to pressure \r\nto provide more affordable housing. Meanwhile, prop-\r\nerty valuation and mortgage systems have historically \r\nfocused on borrowers’ credit and market conditions, \r\noverlooking extreme weather risks and insurance factors, \r\nwhich allows homeowners to buy in high-risk areas. The \r\nreport examines these stakeholders’ incentives to invest \r\nin local- and property-level resilience measures. \r\nIt also offers a two-tier approach to addressing rising \r\nproperty exposure to reduce risks that impact insurance. \r\nTier 1 focuses on scaling existing measures that have \r\nenhanced local resilience:\r\nMeasures that have already enhanced \r\nresilience to extreme weather should be \r\nscaled up.\r\nDevelop a shared understanding of hazards and local \r\nrisks. Collaboration between governments (national/\r\nfederal and state), insurers, and other key stakeholders \r\n– e.g. Australia’s Government Hazards Insurance \r\nPartnership – can help identify regions with growing \r\nexposure to extreme weather, highlight successful \r\nresilience initiatives, and promote the expansion of \r\nprivate insurance. Expanding hazard disclosure laws \r\ncan encourage homeowners to invest in retrofits and \r\ndiscourage buyers from purchasing high-risk properties.\r\nDevelop solutions for preventing risks in new \r\nconstruction. Preventing risks in new construction \r\nrequires the adoption and enforcement of updated \r\nbuilding codes, risk-based land zoning, and policies for \r\nvoluntary relocation and buyouts. Land zoning laws, \r\nsuch as Japan’s disaster risk zones, restrict develop-\r\nment in high-risk areas, while programmes such as the \r\n‘Voluntary Home Buy-back Programme’ in Australia help \r\nhomeowners relocate from disaster-prone regions and \r\nenable rezoning for non-residential use.\r\nFocus on the most impactful retrofit measures to \r\nreduce risks of existing structures. Governments can \r\nlegislate, fund key resilience projects (e.g. the ‘Room \r\nfor the River’ project in the Netherlands, Japan’s Tokyo \r\nunderground floodwater diversion project), and imple-\r\nment home fortification initiatives tied to certification \r\nprogrammes that boost property value and reduce \r\nmortgage and insurance costs (e.g. Strengthen Alabama \r\nHomes). Nature-based solutions can also be used, \r\nwhile digital tools can help homeowners assess and \r\nenhance resilience, often with financial incentives.\r\nRedesign government post-disaster aid to incen-\r\ntivise ex-ante resilience measures. As disaster costs \r\nincrease, national governments can shift financial \r\nresponsibility for resilience to local authorities and \r\nhomeowners while funding large-scale infrastructure \r\nprojects with regional impacts. For example, Germany \r\nmandates flood resilience measures and insurance for \r\nlocal governments, reducing their reliance on post-dis-\r\naster aid, and Canada has reformed its aid programme \r\nto support preventive resilience. Credit rating agencies \r\ncan also use disaster risk management and resil-\r\nience measures as criteria to encourage proactive \r\ninvestments.\r\nLeverage resilience guidelines for informed decision-\r\nmaking. Resilience guidelines produced by insurance-\r\nindustry-supported research organisations could be \r\nused to create certified trainings for property valuers, \r\nhome inspectors, mortgage appraisers, and insurance \r\nbrokers to enhance homeowners’ understanding of \r\nrisks and how to address them. Targeted digital tools for \r\nhomeowners can provide an additional resource.\r\nScale up the development and adoption of innovative \r\nsolutions. Investment in transformative technologies \r\nin areas such as climate risk modelling, climate-linked \r\nhousing and mortgage valuation, coordinated planning \r\nplatforms for managing wildfires and floods, new \r\nbuilding materials and construction methods, and \r\nsensors and drones for proactive infrastructure and \r\nutility maintenance could be expanded. \r\nTier 2 outlines needed structural changes to prop-\r\nerty valuation and mortgage systems and govern-\r\nment-backed insurance pools to incentivise and drive \r\nbehavioural change among homeowners:  \r\nStructural changes to valuation and \r\nmortgage systems could lead to \r\nbehavioural changes to boost risk \r\nprevention.\r\nImprove property valuation reports used for mort-\r\ngage appraisals to include the property’s ‘insured value’ \r\n– i.e. the cost of rebuilding – and its risk e.g. building \r\ncodes used and implemented retrofits. Mandatory \r\nhazard disclosure laws could be leveraged to increase \r\ntransparency. \r\nSet insurance coverage requirements based on \r\nrisk-based insurance premiums and assess the \r\nborrower’s ability to pay before mortgage approval. \r\nLenders should make underwriting and rate decisions \r\nusing forward-looking stress tests that consider rising \r\ninsurance costs and potential drops in property values \r\nover the term of the mortgage in hazard-prone regions. \r\n\r\n8\r\nThese conditions, along with robust monitoring of \r\nborrowers’ property insurance annually to keep track of \r\ninsurance-related delinquencies, could be enforced by \r\nmortgage and lending regulatory bodies to incentivise \r\nprevention and raise awareness. \r\nStrengthen cross-sectoral collaboration in imple-\r\nmenting home-certification programmes with \r\nincentives. Collaboration among lenders, insurers, \r\ngovernments, and the real estate sector could support \r\nthe implementation of home resilience certification \r\nprogrammes. These have been shown to lead to \r\nhigher property valuations and lower mortgage and \r\ninsurance rates, encouraging homeowners to invest in \r\nproperty retrofits (e.g. the Strengthen Alabama Homes \r\nprogramme in the US).\r\nCross-sectoral collaboration could \r\nenable home-resilience certification \r\nprogrammes with financial incentives \r\nfor homeowners to invest in retrofits.\r\nEnhance insurance partnerships to increase aware-\r\nness and strengthen resilience. Re/insurers could \r\ncollaborate with governments and other stakeholders to \r\nenhance understanding of hazards and regions facing \r\nrising insurance challenges to enable targeted resilience \r\nmeasures. Certification trainings and resilience initia-\r\ntives developed through research funded by insurers \r\ncan also be used. Insurers can expand their investments \r\nin restoring and conserving nature-based systems such \r\nas wetlands for greater local resilience.\r\nGovernment-backed insurance pools could promote \r\nand support resilience measures and discourage (re)\r\nbuilding in high-risk locations, e.g. by using risk-based \r\npricing, discouraging the purchasing of high-risk prop-\r\nerties, setting time-bound resilience goals, and incen-\r\ntivising property strengthening through discounts and/\r\nor funding, with the goal of attracting private insurers to \r\nthe market.\r\nInsurance regulators should promote risk-based \r\npricing and support resilience measures such as risk-\r\nbased zoning and building codes, educate the public \r\non private insurance, and reform government-backed \r\ninsurance pools to prioritise resilience.\r\nCredit rating agencies could incorporate extreme \r\nweather risks and resilience strategies in their proce-\r\ndures, e.g. for governments at all levels and lenders via \r\nrated mortgage credit securities.\r\nSociety-wide collaboration is needed \r\nto keep insurance available and \r\naffordable in the face of increasing \r\nclimate risk.\r\nThis report aims to bring focus to how socioeconomic \r\nfactors exacerbate extreme weather risks and highlight \r\nthe need for a paradigm shift towards an all-of-society \r\napproach to reduce exposure and enhance local \r\nresilience. Investing in decarbonisation offers long-term \r\nfinancial returns by addressing the root cause of climate \r\nchange. In a world that has not yet made adequate \r\nprogress to reduce greenhouse gas emissions, \r\nincreasing investments in adaptation and building local \r\nresilience is more important than ever. It is cost-effective \r\nand addresses short-term challenges, particularly for \r\nthose most vulnerable to extreme weather, and provides \r\nlong-term benefits by preventing exposures from rising. \r\nCollaboration will be essential to driving innovative \r\nsolutions in this space. \r\n\r\n9\r\n1\r\nThe rising \r\ninsurance \r\nchallenge\r\n\r\n10\r\n1.1 \r\nEconomic and insured losses related to \r\nextreme weather\r\nOver the last three decades, global economic losses \r\nassociated with weather-related extremes have risen \r\nsignificantly.1 Climate change is impacting the charac-\r\nteristics of extreme weather events differently around \r\nthe world.2 However, research conducted by the insur-\r\nance industry has revealed that socioeconomic factors, \r\nsuch as land-zoning approaches leading to higher \r\nconcentrations of people and assets in hazard-prone \r\nareas, ageing infrastructure, urbanisation patterns, and \r\nincreases in building-replacement costs, are among \r\nthe key drivers exacerbating extreme-weather-related \r\nrisks.3 \r\nInsured losses from extreme weather \r\nevents are rising, accounting for \r\nroughly one third of total economic \r\nlosses on average.\r\n1\t\r\nEconomic losses combine insured and non-insured losses, including financial losses directly attributable to a major event, i.e. \r\ndamage to buildings, infrastructure, etc. as well as losses due to business interruption as a direct consequence of property \r\ndamage. Insured losses are gross losses paid by commercial and/or government schemes.\r\n2\t\r\nIPCC 2023; Munich Re 1973. In 1973, Munich Re released the first insurance industry report linking rising flood risk to anthro-\r\npogenic climate change.\r\n3\t\r\nSwiss Re Institute 2024.\r\nReducing weather-related property risks requires \r\naddressing the changing frequency and severity of \r\nweather-related hazards through climate change \r\nmitigation actions to reduce greenhouse gas (GHG) \r\nemissions, as well as implementing risk-reduction and \r\n-prevention measures to minimise the exposure and \r\nvulnerability of assets (Figure 1). Efforts are underway \r\nto decarbonise the economy, but investment in adapta-\r\ntion and local resilience is cost effective and provides \r\nboth immediate and long-term benefits, especially for \r\nthose most vulnerable to extreme weather.\r\nReducing weather-related property risks \r\nrequires implementing risk-reduction and\r\n-prevention measures to minimise \r\nexposure and vulnerability.\r\nThe rising insurance \r\nchallenge\r\n\r\n11\r\nSource: Swiss Re Institute, modified by the Geneva Association4\r\nGlobally, insured losses from extreme weather events \r\nhave been rising, accounting for roughly one third of \r\ntotal economic losses on average (Figure 2). While \r\ninsured losses vary significantly from year to year, \r\nthey have exceeded USD 100 billion every year since \r\n2020 (combined blue bars in Figure 2). For 2024, total \r\neconomic and insured losses are estimated at USD 320 \r\nbillion and USD 140 billion, respectively.5 Insured losses \r\nare expected to surpass USD 200 billion in 2025.6 \r\nLosses from extreme weather are \r\nworsened by socioeconomic factors \r\nlike poor land use, outdated codes, \r\nurbanisation, and ageing infrastructure.\r\n4\t\r\nIbid.\r\n5\t\r\nMunich Re 2025a,b. \r\n6\t\r\nMixides 2025. \r\n7\t\r\nSwiss Re Institute 2024. These natural catastrophes tend to happen less frequently, but with high loss potential and include \r\nsecondary effects. They are traditionally well-monitored and managed in advanced re/insurance markets. \r\n8\t\r\nIbid. These natural catastrophes can happen relatively frequently and typically generate low- to medium-sized losses. There \r\nis less rigour in industry monitoring and modelling than for perils such as hurricanes, as well as weaker exposure data capture \r\nand claims tracking.\r\n9\t\r\nMunich Re NatCaTSERVICE.\r\n10\t\r\nMunich Re 2025a,b. Based on latest estimates by Munich Re and communications with Munch Re’s NatCatSERVICE Team.\r\nTraditionally, the highest concentration of weather-re-\r\nlated insured losses have been from less-frequent but \r\nhigh-impact perils such as US hurricanes, typhoons in \r\nJapan, and winter storms in Europe (dark blue bars in \r\nFigure 2).7 However, accumulated insured losses asso-\r\nciated with more localised perils such as floods, wild-\r\nfires, and severe convective storms such as hail and \r\ntornados8 are also on the rise (light blue bars in Figure \r\n2).9 Importantly, between 2000 and 2023, annual \r\naccumulated insured losses for such ‘secondary’ perils \r\naccounted for 55% of total insured losses on average. \r\nIn 2024, secondary perils accounted for nearly 50% of \r\ntotal insured losses.10\r\nFIGURE 1: RISING RISKS DUE TO MORE EXTREME WEATHER, SLOW-CHANGING CLIMATIC TRENDS,  \r\nAND GROWING EXPOSURE AND VULNERABILITY\r\nNatural climate variability \r\nand anthropogenic climate \r\nchange\r\nSocioeconomic drivers\r\nNeed for climate change \r\nmitigation measures to \r\nreduce greenhouse gas \r\nemissions\r\nNeed for behavioural changes  \r\nto reduce exposure \r\nand vulnerability at the local level\r\nHazard\r\nRisk\r\nExposure\r\nWhere \r\nwe build\r\nVulnerability\r\nHow we \r\nbuild\r\nX\r\n=\r\n\r\n12\r\nFIGURE 2: GLOBAL INSURED AND UNINSURED LOSSES RELATED TO EXTREME WEATHER (1990–2023) \r\n11\t\r\nSwiss Re Institute 2024.\r\n12\t\r\nIPCC 2023. Recent climate research warns that critical climate thresholds, risking abrupt or irreversible change, are already \r\npossible at current warming levels and may become likely within 1.5–2°C range. Such shifts could have catastrophic socioec-\r\nonomic and ecological impacts, outpacing society’s ability to adapt. This may lead to more frequent droughts, wildfires, and \r\nother extreme weather that human systems cannot manage.\r\nNote: USD inflation adjusted to 2024\r\nSource: Geneva Association, based on data from Swiss Re Institute11 \r\nAppendix 1 provides an overview of regions where \r\nthe severity and frequency of extreme weather events \r\nsuch as floods and wildfires are expected to rise \r\nwith high or medium certainty, under a 2°C warming \r\nscenario.12 Box 1 highlights some of the climatic and \r\nenvironmental conditions that increase the risk of \r\nwildfires and floods.\r\nAccumulated, insured losses \r\nassociated with localised, more \r\nfrequent perils such as floods, \r\nwildfires, hail and tornados are on the \r\nrise, accounting for 55% of extreme \r\nweather-related insured losses \r\nbetween 2000–2023.\r\n50\r\n0\r\n100\r\n150\r\n200\r\n250\r\n300\r\n350\r\nUSD billion\r\n400\r\n450\r\n500\r\n1990\r\n1991\r\n1992\r\n1993\r\n1994\r\n1995\r\n1996\r\n1997\r\n1998\r\n1999\r\n2000\r\n2001\r\n2002\r\n2003\r\n2004\r\n2005\r\n2006\r\n2007\r\n2008\r\n2009\r\n2010\r\n2011\r\n2012\r\n2013\r\n2014\r\n2015\r\n2016\r\n2017\r\n2018\r\n2019\r\n2020\r\n2021\r\n2022\r\n2023\r\nUninsured losses – total weather-related perils \r\nInsured losses – high-frequency, low-impact perils such as floods, wildfires and convective storms  \r\nInsured losses – low-frequency, high-impact perils such as hurricanes and tyhphoons \r\n\r\n13\r\nSource: Insurance Institute for Business and Home Safety (IBHS), IPCC, and the Geneva Association13\r\n13\t\r\nIBHS 2020a; IPCC 2023; Geneva Association 2020a.\r\n14\t\r\nGeneva Association 2018a. \r\n15\t\r\nGlobal Reinsurance Forum 2024. For example, in Africa, the Middle East, Asia, and South America.\r\n16\t\r\nMoral hazard is often a function of underlying asymmetric information. For example, if insurers could readily observe the \r\nactions of policyholders, they could potentially adjust the terms and conditions of coverage, including exclusions, limits, and \r\nsublimits.\r\n1.2 The protection gap \r\nProtection gaps are defined as the proportion of uninsured \r\nlosses as a share of total economic losses.14 As shown in \r\nFigure 3, the protection gap for weather-related extremes \r\nvaries significantly across different regions. Notably, North \r\nAmerica and Oceania/Australia have the lowest while Africa \r\nand Asia have the largest protection gaps.\r\nTable 1 outlines the underpinning drivers of protection \r\ngaps. In some regions, despite insurance being available \r\nand affordable, factors such as low risk awareness, \r\nunderestimation of risks, an ‘it will not happen to me’ \r\nmindset, reliance on post-disaster government aid, and \r\na lack of financial education could lead to limited uptake \r\n(demand) by homeowners and businesses. Additionally, \r\nthe complexity of insurance products and unclear \r\nwording around coverage and exclusions could lead to \r\nmisunderstandings and subsequently to distrust of the \r\nindustry. In some regions, affordability issues have led to \r\nhomeowners opting not to purchase insurance.\r\nIn some countries, insurance supply may be limited \r\ndue to a lack of data for accurate risk pricing, limited \r\naccess to reinsurance capacity linked to trade barriers \r\naffecting foreign reinsurers,15 information asymmetry/\r\nadverse selection (e.g. higher insurance demand from \r\nthose with past losses), moral hazard,16 and legal and \r\nregulatory challenges.\r\nBox 1:  Wildfire and flood risks explained\r\nWildfire frequency and severity are influenced by various factors:\r\n•\t\r\nWeather – Rising temperatures and changing precipitation could lead to drier fuels, longer fire seasons, \r\nand more extreme fires. Wind speeds up fire spread by supplying more oxygen and hinders fire \r\nsuppression efforts.\r\n•\t\r\nFuel – Vegetation such as grass, shrubs, trees, and dead leaves, as well as structures, provide fuel for \r\nfires.\r\n•\t\r\nTopography – Steep slopes accelerate fire spread, with fires typically moving faster uphill.\r\n•\t\r\nIgnition source – Lightning, campfires, arson, utility incidents, and human accidents (e.g. cigarette \r\nbutts, fireworks) can start wildfires.\r\nFloods can be divided into different types:\r\n•\t\r\nFluvial or river floods are linked to prolonged heavy rainfall in river basins, particularly during storms, \r\nwhich can overwhelm rivers.\r\n•\t\r\nPluvial or flash floods (mainly in urban areas) occur due to rainfall exceeding the capacity of drainage \r\nsystems or the ground’s ability to absorb it. \r\n•\t\r\nCoastal (storm surges, tidal flooding) floods can be caused by rising sea levels combined with \r\nstronger and more frequent tropical storms, and changes in atmospheric circulation patterns (such as \r\nthose linked to El Niño and La Niña events) which make storm surges more powerful and unpredict-\r\nable, especially in low-lying coastal regions.\r\nAll types are exacerbated by deforestation and land-use planning. Each type has different impacts and \r\nrequires different risk management strategies. According to the IPCC:\r\n•\t\r\nThe frequency and intensity of heavy rainfall have increased since the 1950s, driven mainly by human-\r\ncaused climate change, leading to more local flooding.\r\n•\t\r\nThe wettest day of the year’s precipitation is projected to rise in most regions, even those with \r\ndeclining soil moisture.\r\n•\t\r\nThe global water cycle is intensifying, with more extreme wet and dry events.\r\n\r\n14\r\nFIGURE 3: REGIONAL PROTECTION GAPS FOR EXTREME WEATHER EVENTS (2014–2023)\r\n17\t\r\n Swiss Re Institute 2024.\r\nSource: Geneva Association, based on data from Swiss Re Institute17\r\n2014 2015 2016 2017 2018 2019 2020 2021 2022 2023\r\nNorth America ~42%\r\n0\r\n10\r\n20\r\n30\r\n40\r\n50\r\n60\r\n70\r\n80\r\n90\r\n100\r\n2014 2015 2016 2017 2018 2019 2020 2021 2022 2023\r\nOceania/Australia ~41%\r\n2014 2015 2016 2017 2018 2019 2020 2021 2022 2023\r\nEurope ~60%\r\n2014 2015 2016 2017 2018 2019 2020 2021 2022 2023\r\nAfrica ~91%\r\n2014 2015 2016 2017 2018 2019 2020 2021 2022 2023\r\nLatin America ~80%\r\n2014 2015 2016 2017 2018 2019 2020 2021 2022 2023\r\nAsia ~84%\r\n%\r\n0\r\n10\r\n20\r\n30\r\n40\r\n50\r\n60\r\n70\r\n80\r\n90\r\n100\r\n%\r\n0\r\n10\r\n20\r\n30\r\n40\r\n50\r\n60\r\n70\r\n80\r\n90\r\n100\r\n%\r\n0\r\n10\r\n20\r\n30\r\n40\r\n50\r\n60\r\n70\r\n80\r\n90\r\n100\r\n%\r\n0\r\n10\r\n20\r\n30\r\n40\r\n50\r\n60\r\n70\r\n80\r\n90\r\n100\r\n%\r\n0\r\n10\r\n20\r\n30\r\n40\r\n50\r\n60\r\n70\r\n80\r\n90\r\n100\r\n%\r\n\r\n15\r\nTABLE 1: FACTORS DRIVING THE EXTREME WEATHER INSURANCE PROTECTION GAP\r\n18\t\r\n Geneva Association 2016a; European Commission 2024a; EIOPA and ECB 2024.\r\n19\t\r\n Swiss Re 2025. \r\nDemand-side factors\r\nSupply-side factors\r\n•\tLow levels of risk awareness and perception, under-\r\nestimation of risk, and limited access to information \r\nor data on risks\r\n•\tLimited insurance market capacity (including limited \r\naccess to reinsurance)\r\n•\tReliance on post-disaster government handouts\r\n•\tInformation asymmetry/adverse selection (e.g. those \r\nwho experienced losses being more prone to buy \r\ninsurance)\r\n•\tLack of risk management culture \r\n•\tMoral hazard \r\n•\tLack of knowledge of available insurance solutions/ \r\nproducts and incorrect assumptions around cover\r\n•\tLegal and regulatory challenges\r\n•\tComplexity of insurance products\r\n•\tLack of data for accurate risk pricing \r\n•\tMistrust \r\n•\tUnaffordability \r\nSource: Geneva Association, European Commission, and the European Insurance and Occupational Pensions Authority (EIOPA) \r\nand European Central Bank (ECB)18 \r\nTables 2 and 3 provide examples of some of the costliest floods and wildfires of the last 10 years, respectively. \r\nThe economic losses of the 2025 greater Los Angeles wildfires are still unknown (as of April 2025), but prelim-\r\ninary insured losses were estimated at USD 40 billion as of the end of February 2025. This makes the event \r\npotentially the costliest wildfire to date.19 \r\nTABLE 2: COSTLY FLOODS WORLDWIDE, 2015–2024 \r\nDate\r\nRegion\r\nEconomic losses \r\n(USD billion)\r\nInsured losses \r\n(USD billion)\r\nUninsured \r\nlosses \r\n(% of economic \r\nlosses)\r\nJuly 2021\r\nWestern and Central \r\nEurope\r\n45.6\r\n13\r\n71.5%\r\nJune – September 2020\r\nChina\r\n35\r\n2\r\n94.3%\r\nMay – September 2023\r\nChina\r\n32.2\r\n1.4\r\n95.7%\r\nJune – September 2021\r\nChina\r\n30\r\n2.1\r\n93%\r\nSummer 2016\r\nChina\r\n28\r\n0.8\r\n97.1%\r\nOctober 2024\r\nSpain (Valencia)\r\n16.1\r\n3.9\r\n75.8%\r\nJune – July 2024\r\nChina\r\n15.5\r\n0.4\r\n97.4%\r\n\r\n16\r\nDate\r\nRegion\r\nEconomic losses \r\n(USD billion)\r\nInsured losses \r\n(USD billion)\r\nUninsured \r\nlosses \r\n(% of economic \r\nlosses)\r\nAugust 2016\r\nUS (Louisiana, \r\nMississippi)\r\n10-15\r\n3\r\n70-80%\r\nJuly 2018\r\nJapan\r\n10\r\n2.7\r\n73%\r\nMay 2023\r\nItaly  \r\n(Emilia-Romagna)\r\n9.8\r\n0.6\r\n93.9%\r\nJuly 2020\r\nJapan (Kyushu)\r\n8.5\r\n0.2\r\n97.6%\r\nFebruary–March 2022\r\nAustralia \r\n(Queensland, New \r\nSouth Wales)\r\n8\r\n4\r\n50%\r\nApril–May 2019\r\nCanada\r\n0.8\r\n0.2\r\n75%\r\nSource: AON Global Climate and Catastrophe Insight reports20\r\n20\t AON 2014, 2025.\r\n21\t\r\nIt is expected that the economic and insured losses associated with the January 2025 Los Angeles fires will surpass those of \r\nthe Camp Fire.\r\n22\t AON 2014, 2025.\r\n \r\nTABLE 3: COSTLY WILDFIRES WORLDWIDE, 2015–202421\r\nDate\r\nRegion\r\nEconomic losses \r\n(USD billion)\r\nInsured losses \r\n(USD billion)\r\nUninsured losses \r\n(% of economic \r\nlosses)\r\nNovember 2018\r\nUS \r\n(California, Camp Fire)\r\n15\r\n12\r\n20%\r\nOctober 2017\r\nUS \r\n(California, Tubbs Fire)\r\n13\r\n11\r\n15.4%\r\nNovember 2018\r\nUS \r\n(California, Woosley Fire)\r\n5.8\r\n4.5\r\n22.4%\r\nAugust 2023\r\nUS \r\n(Hawaii)\r\n5.5\r\n3.5\r\n36.4%\r\nNovember 2019– \r\n­January 2020\r\nAustralia (bushfires)\r\n5\r\n1.1\r\n78%\r\nMay 2016\r\nCanada\r\n4.5\r\n2.8\r\n37.8%\r\nOctober 2017\r\nPortugal\r\n0.9\r\n0.3\r\n67%\r\nSource: AON Global Climate and Catastrophe Insight reports22\r\nTABLE 2: COSTLY FLOODS WORLDWIDE, 2015–2024 (continued)\r\n\r\n17\r\n1.3 The critical role of risk-based insurance \r\npricing \r\nAccess to insurance is crucial for economic growth, \r\nbacking investments, and building financial resilience.23 \r\nWithout insurance, the financial burden of natural \r\ncatastrophes (Nat Cat) falls on individuals, businesses, \r\nand governments. Through loss indemnification, those \r\nwho have suffered damage gain financial resources \r\nto rebuild and restore more quickly.24 Higher Nat Cat \r\ninsurance penetration therefore helps countries to \r\nrecover faster and reduces the burden on taxpayers. \r\nUninsured catastrophe losses drive macroeconomic \r\ncosts, while well-insured events can have minimal or \r\neven positive economic effects.25\r\nInsurance regulators face the challenge of balancing \r\nconsumer protection by keeping insurance affordable, \r\nwhile safeguarding the financial stability of insurers. \r\nThe question therefore becomes whether insurers \r\nshould charge premiums based on actual risk or cap \r\nrates for affordability. \r\nRisk-based insurance pricing for extreme weather \r\nevents is essential to ensure premiums reflect the \r\nactual risk of a location or property.26 By adjusting \r\npremiums based on the likelihood and severity of \r\nextreme weather events, as well as exposure and \r\nvulnerability profiles, insurers can better cover potential \r\nclaims in affected areas. This approach could have \r\nseveral other benefits: 27 \r\n\t\r\n●Indicates property risk levels to encourage \r\ninvestment in risk reduction and prevention: Higher \r\npremiums can motivate homeowners, communities, \r\nand governments at all levels to invest in measures \r\nsuch as property retrofits. In regions with recurrent \r\nextreme weather events, this could lead to the \r\ndevelopment of targeted government programmes \r\nfor property buybacks, relocation, and rezoning to \r\nkeep people out of high-risk areas.\r\n\t\r\n●Promotes fairness and reduces adverse selection: \r\nThose with greater risk are charged higher premiums. \r\n\t\r\n●Improves insurers’ financial health: Risk-based \r\npricing promotes the financial health of re/insurers by \r\nensuring that companies are sufficiently capitalised to \r\npay out claims.28\r\n23\t Geneva Association 2016b: Standard & Poor’s 2015a,b. Large natural catastrophes also weaken sovereign, municipal, and \r\ncompany ratings, especially if risk management and insurance are not in place.\r\n24\t Von Peter et al. 2012.\r\n25\t Ibid.\r\n26\t Musselwhite 2025.\r\n27\t Rosalsky 2025.\r\n28\t Resources for the Future 2024.\r\n29\t Actuaries Institute 2024; APCIA 2023; Gongloff 2024.\r\n30\t Gongloff 2024.\r\nRisk-based pricing brings focus to \r\nactual risk levels, empasising the \r\nneed for preventive measures and \r\nencouraging fairness by charging higher \r\npremiums to those with greater risk.\r\nHowever, while risk-based pricing offers benefits in terms \r\nof aligning premiums with actual risk, it also presents \r\nchallenges related to affordability and market stability. \r\n1.4 Insurance availability and affordability \r\nchallenges in specific regions \r\nThis report mainly focuses on advanced economies \r\nwith mature and competitive insurance markets in \r\nthe housing sector, with particular focus on Australia, \r\nCanada, the EU, Japan, the UK, and the US.\r\nIn these jurisdictions, rising exposure to weath-\r\ner-related extremes are driving concerns over the \r\navailability and/or affordability of insurance for some \r\nperils in certain locations. Inadequate risk reduction for \r\nexisting buildings and insufficient preventive meas-\r\nures for new construction further exacerbate these \r\nchallenges.29 For example, in various states in the US, \r\nroughly 15% of insured properties or ~2% of the USD \r\n47 trillion housing market face insurance availability \r\nand/or affordability challenges (Figure 4).30 In Australia, \r\n15% of properties are estimated to be under extreme \r\nstress for affordability. In Europe, market participants \r\nhave warned about the need to increase insurance \r\npremiums to respond to extreme weather events, such \r\nas the 2023 wildfires.  \r\n\r\n18\r\nFIGURE 4: REGIONAL INSURANCE AVAILABILITY AND AFFORDABILITY CHALLENGES \r\nSource: Geneva Association\r\n31\t\r\nDamodaran 2023. The return on equity for US P&C insurers rose to to 13.5% in 2024. \r\n32\t APCIA 2023.\r\n33\t O’Neill et al. 2025.\r\n34\t Sen et al. 2023.\r\n1.4.1\t Availability \r\nOver the last few years, inadequate risk-reduction and \r\nrisk-prevention measures have forced some insurance \r\ncompanies to limit or cease offering new policies \r\nfor some hazards in certain areas of the US. Similar \r\nchallenges have also been observed more recently in \r\nCanada (Table 4). Importantly, in many cases, this was \r\nin response to regulatory pressure to cap insurance \r\npremiums and, in some cases, to delays with insurance \r\nrepricing (Table 4). \r\nIn some regions, insurers have had to \r\nlimit or cease offering coverage for \r\nsome perils, mainly due to regulatory \r\npressure to cap premiums.\r\nIn the US, P&C re/insurers are concerned about \r\nshrinking capital due to consistently high losses from \r\ncertain perils in some regions, resulting in lower return \r\non equity compared to other financial sectors. In \r\n2022, US P&C insurers’ return on equity reached its \r\nlowest value (5.7%), compared to all economic sectors \r\n(16.5%), investment and asset management (17.2%), \r\nand brokerage and investment banking (13.4%).31 This \r\ncould lead to hesitation among investors and capital \r\nproviders, making it difficult for insurers to attract \r\nsufficient capital to replenish the industry’s capacity.32 \r\nA recent investor survey indicates a 27% decline in \r\ngrowth expectations for P&C insurers beyond 2026, \r\ndriven by increasing challenges related to availability, \r\naffordability, and escalating risks, compounded by \r\ninadequate local risk prevention measures.33\r\nIn the U.S., major insurers with strong credit ratings \r\nare pulling out of high-risk areas like Florida. Some \r\ncompanies use their ‘non-admitted’ or ‘surplus lines’ \r\nsubsidiaries, which are permitted to operate through \r\nlicensed brokers and are not state regulated. They have \r\nbecome increasingly risk-averse, reducing coverage. \r\nAs a result, a different type of non-admitted insurer \r\nis gaining market share; they are smaller, undercap-\r\nitalised, less diversified, and have a higher risk of \r\ninsolvency. Despite strong ratings from Demotech, \r\naccording to Alexander and Kaufam (2024) seven went \r\ninsolvent in Florida in 2021–22.34\r\nSome regions in the US are still \r\nunderpriced despite increased \r\ninsurance premiums\r\nNorth America\r\nEurope\r\nAustralia\r\nIn Europe, insurance premiums\r\nare underpriced for weather-related \r\nrisks such as the 2023 wildfire\r\nFor 15% of properties in Australia, \r\nthe cost of insurance is equivalent \r\nto one month of household income\r\nChallenges with the availability \r\nof insurance in some regions \r\nfor some perils, mainly due to\r\nregulatory caps on insurance\r\npremiums, despite rising risks\u0001\r\nInsurance premiums \r\nunderestimate \r\nextreme weather risk\r\nChallenges with affordability \r\nlinked to risk-based insurance \r\npricing\r\n\r\n19\r\nTABLE 4: REGIONS WITH INSURANCE AVAILABILITY \r\nISSUES\r\nCountry\r\nRegions\r\nUS\r\n•\tCalifornia, Florida; Arkansas, \r\nColorado, Louisiana, Minnesota, \r\nOklahoma, South Carolina, South \r\nDakota, and Washington\r\nCanada \r\n•\tQuebec and 10% of households \r\nacross other regions in Canada, \r\nwith high exposure to floods\r\nSource: Mac, Andersson, Campisi and Nici, Flitter, Gillers, \r\nMohammed, Shingler and Insurance Bureau of Canada35\r\nAffordability \r\nIn markets where insurers are increasingly factoring in \r\nrising extreme weather risks in pricing, homeowners’ \r\ninsurance premiums are rising. Over time, this could \r\nmake insurance less affordable, and homeowners and \r\nsmall businesses may decide not to buy it.36 \r\nRising extreme weather risks and a \r\nlack of resilience measures drive up \r\nhomeowners’ premiums to the point \r\nwhere some have to forego insurance.\r\nIn the US, despite an average rise of 11% in insurance \r\npremiums (from 7% in Michigan to 56% in Florida) in \r\nrecent years,37 some studies show that premiums in \r\nsome areas are still underpriced.38 In Europe, according \r\nto market participants, insurance prices will have to \r\nrise over the next two years as the industry responds \r\nto events such as the 2023 wildfires, which resulted in \r\nthe fourth largest burnt area on record in the EU.39 Box 2 \r\nprovides an overview of rising insurance rate trends in \r\ndifferent regions.\r\nWith rising claims in the US, reinsurance prices rose by \r\n20–40% in 2022–2023, whereas in Europe they have \r\nincreased by just 10–12%.40\r\n35\t Mac 2023; Andersson 2024; Campisi and Nici 2024; Flitter 2023; Mohammed 2024; Shingler 2021; Insurance Bureau of \r\nCanada 2021.\r\n36\t APCIA 2023; Society of Actuaries Research Institute 2024.\r\n37\t\r\nJoint Economic Committee Democrats 2024; CNW Group 2024; Financial Times 2024.\r\n38\t America First Policy Institute 2024; DeltaTerra Capital 2021; Walker 2025a. In California, an ‘emergency’ increase of 22% to \r\none company’s homeowners’ insurance was announced in 2025.\r\n39\t The Financial Times 2023; Copernicus 2024; Joint Research Centre 2023. The economic losses due to wildfires in the EU in \r\n2023 were above EUR 2.5 billion.\r\n40\t Ibid.\r\n41\t\r\nJoint Economic Committee Democrats 2024; Actuaries Institute 2024; CNW Group 2024; The Financial Times 2023; Insure \r\nour Future 2024; Smith 2024.\r\nBox 2: Trends in insurance rates in \r\ndifferent regions \r\nUS\r\nIn 2023, the average homeowners’ insurance rate \r\nrose by over 11%. The five largest percentage \r\nincreases between 2020 and 2023 were in:\r\n•\t\r\nFlorida (56%)\r\n•\t\r\nLouisiana (55%)\r\n•\t\r\nDistrict of Columbia (51%)\r\n•\t\r\nColorado (43%)\r\n•\t\r\nUtah (42%) \r\nCanada \r\nBetween 2023 and 2024, homeowners’ insurance \r\npremiums rose by 7.66% on average, with some \r\nprovinces seeing increases of up to 12%.\r\nAustralia\r\nBetween 2023 and 2024, the median retail price of \r\ninsurance increased by 10%. The states and territo-\r\nries with the highest increases were:\r\n•\t\r\nWestern Australia (19%)\r\n•\t\r\nSouth Australia (16%)\r\n•\t\r\nNew South Wales (15%)\r\nJapan\r\nIn October 2024, four major P&C insurers \r\nannounced plans to raise fire insurance premiums \r\nby 13% on average due to the increasing number of \r\nnatural disasters.\r\nEurope\r\nMarket participants have warned that insurance \r\nprices in Europe will have to rise over the next two \r\nyears as the industry responds to extreme weather \r\nsuch as the 2023 wildfires.\r\nUK\r\nThe price of the average UK home insurance policy \r\nincreased by about 20% in 2024, influenced by \r\ninsurers paying out a record GBP 573 million after a \r\nseries of storms in 2023. \r\nSource: Joint Economic Committee Democrats, Actuaries Insti-\r\ntute, CNW Group, The Financial Times, Insure our Future, and \r\nSmith41\r\n\r\n20\r\nNotably, due to the extent to which risks are rising, \r\npremiums could reach levels that put significant \r\nstress on homeowners. To this end, interventions by \r\ngovernments and other stakeholders that prioritise \r\nrisk reduction and prevention to reduce exposure and \r\nvulnerability are critical. \r\nThe Australia Actuaries Home Insurance Affordability \r\n(AAHIA) Index has quantified the tipping point at which \r\naffordability affects customers’ insurance-purchasing \r\ndecisions. According to the index, this occurs when \r\nhomeowners pay more than four weeks of gross \r\nhousehold income (more than 8.3%) for annual home \r\ninsurance premiums. The AAHIA helps identify areas \r\nunder significant affordability stress. In 2024, an \r\nestimated 1.61 million Australian households (around \r\n15%) faced this stress, up from 1.24 million in 2023, \r\n42\t  Actuaries Institute 2024.\r\n43\t  Louisiana Legislative Auditor 2025. For the remaining five states, median homeowners and flood insurance spending as a \r\npercentage of household income was: Georgia (1.3%), South Carolina (1.35%), Alabama (1.5%), Texas (1.53%), Mississippi \r\n(1.8%).\r\n44\t Actuaries Institute 2024.\r\nwith the highest concentrations in Western Australia, \r\nQueensland, and the Northern Territory (Figure \r\n5).42 This information brings focus to regions where \r\ninvestments in local resilience are imperative. In 2023, \r\nmedian homeowners and flood insurance spending \r\nas a percentage of household income among south-\r\neastern hurricane-prone states in the US varied from \r\n1.2% in North Carolina to 2% in Florida and 2.1% in \r\nLouisiana.43\r\nIdentifying insurance affordability \r\ntipping points helps pinpoint where \r\nlocal resilience investments are needed \r\nmost.\r\nFIGURE 5: AUSTRALIAN ACTUARIES HOME INSURANCE AFFORDABILITY INDEX \r\nSource: Actuaries Institute44 \r\nMedian affordability\r\n No pressure 0–1.1 weeks\t\r\n Low pressure 1.1–1.8 weeks\t\r\n Medium pressure 1.8–2.5 weeks     \r\n High pressure 2.5–4 weeks\t\r\n Extreme pressure: 4+ weeks\t\r\n No exposure\r\n\r\n21\r\nWithout measures to reduce local- and property-level \r\nexposure and vulnerability, insurance challenges will \r\nbecome more acute. Addressing them requires incen-\r\ntives for scaled interventions by different stakeholders \r\nto reduce the exposure of existing buildings and \r\nprevent risks for new ones.  \r\n1.5 Aims and structure of the report\r\nThis report reviews the evidence on factors driving the \r\nincreasing exposure and vulnerability of properties to \r\nextreme weather and explores the roles of the stake-\r\nholders whose actions impact them. It also outlines an \r\nall-of-society approach for manging these risks. \r\nThe report focuses on developed economies with mature \r\ninsurance markets: Australia, Canada, the EU, Japan, the \r\nUK, and the US. The research methodology involved an \r\nextensive literature review, 14 technical roundtables, and \r\nnumerous one-on-one interviews with experts.\r\nSection 2 explores factors that are driving up property \r\nrisks related to extreme weather. Section 3 identifies \r\nkey stakeholders whose actions impact the exposure \r\nand vulnerability of a property and/or its surroundings \r\nand their incentives to invest in local resilience \r\nmeasures. It also takes a deep dive into the links \r\nbetween property valuation and mortgage systems \r\nand insurance and explores government interventions \r\nvia government-backed re/insurance pools. Section \r\n4 outlines a framework for building local resilience \r\nand bringing about the structural changes needed \r\nto incentivise and drive behavioural change among \r\nhomeowners. Section 5 outlines some of the key \r\nchallenges ahead.\r\n\r\n22\r\nSocioeconomic \r\ndrivers of property \r\nrisks related to \r\nextreme weather \r\n2\r\n\r\n23\r\n2.1 \r\nRising exposure and vulnerability\r\n2.1.1\t Growing concentration of people and assets in \r\nhazard-prone areas due to land-zoning practices\r\nPopulation growth and land-management practices \r\nhave resulted in an increasing concentration of people \r\nand assets in hazard-prone regions (see Table 5). \r\n45\t In the Netherlands, 58.7% of the population faces flood risk, the largest share of any country in the world.\r\n46\t Rentschler et al. 2022. Population (2020 data) at risk of flooding defined as inundation depths greater than 0.15 m in the event \r\nof a 1-in-100-year flood (a flood with 1% annual probability of occurrence).\r\n47\t Schug et al 2023. 2020 data on population in wildland-urban interface areas, where settlements are near fire-prone vege-\r\ntation. Although  wildland-urban interface areas may not all be equally prone to wildfires, more than two thirds of all people \r\naffected by wildfires during 2003–2020 (experiencing a fire within 1 km of their homes) lived in the WUI.\r\n48\t Rentschler et al 2022; Schug et al 2023.\r\n49\t Xiao 2025; Redfin 2022a.\r\n50\t Climate X 2023.\r\n51\t\r\nThe Flood Hub 2024.\r\n52\t Canadian Climate Institute 2025.\r\n53\t  Hook 2020.\r\nConstruction also continues to take place in hazard-\r\nprone areas, driven by factors like rising demand for \r\naffordable housing. Traditionally, land-zoning policies \r\nhave not been risk based, allowing further develop-\r\nment in areas where the severity and frequency of \r\nhazards are increasing.  \r\nTABLE 5: POPULATION EXPOSURE TO FLOOD AND WILDFIRE RISK IN DIFFERENT REGIONS\r\nUS \r\nCanada\r\nAustralia\r\nJapan\r\nEU  \r\naverage45 \r\nUK\r\nPluvial, fluvial, and \r\ncoastal flood-prone \r\nareas46\r\n12.5%\r\n9.4%\r\n7.9 %\r\n28.7%\r\n16.6%\r\n11%\r\nWildfire-prone areas \r\n(wildland-urban \r\ninterface)47\r\n60.5%\r\n46.8%\r\n61.4%\r\n41.2%\r\n67.4% \r\n66.6%\r\nSource: Rentschler et al. and Schug et al.48\r\nHomes continue to be built in hazard-prone regions. \r\nIn the US, four million homes were built in areas \r\nexposed to hurricanes, wildfires, and extreme heat \r\nbetween 2014 and 2023, with the annual percentage \r\nof new homes in these areas rising from 39% to \r\n57%.49 In Germany, 1,000–2,400 new buildings are \r\nadded to high-risk flood zones annually,50 while 8% \r\nof new homes constructed in the UK since 2013 are \r\nin flood-prone areas.51 In Canada, without changes to \r\nland-zoning policies, over 150,000 homes could be \r\nbuilt in flood-prone areas and more than 220,000 in \r\nwildfire-prone areas by 2030.52 However, major events \r\nlike the 2019–2020 bushfires in Australia have sparked \r\nincreased awareness and reconsideration of building \r\npractices in fire-prone areas, with more focus on fire-\r\nresistant materials.53 \r\nSocioeconomic drivers \r\nof property risks related \r\nto extreme weather \r\nTraditionally, land-zoning policies are not risk \r\nbased, allowing development in areas where \r\nthe severity and frequency of hazards may \r\nbe rising.\r\n\r\n24\r\n2.2.2\tUpdating and enforcing building codes   \r\nTraditionally, building codes have often taken historical \r\nweather hazards such as floods and wildfires and their \r\nrecurrence intervals into consideration. Building codes \r\nare also increasingly factoring in expected future \r\nchanges in the severity and frequency of extreme \r\nweather events. These regulations aim to enhance the \r\nsafety of people and reduce vulnerability of properties \r\nto natural hazards. Codes vary by region and should \r\n54\t International Code Council 2024; Government of Canada 2023a; Australian Building Codes Board 2024; European \r\nCommission 2015; Institute of International Harmonisation for Building and Housing 2024.\r\n55\t\r\nNIBS 2018.\r\n56\t Schug et al. 2023; Radeloff et al. 2018; Canada Wildfire 2016. In Canada, 3.8% of national land is in the WUI, 1.2% is in the \r\nwildland-industrial interface, and 13% is in the infrastructure interface.\r\n57\t\r\nRojanasakul and Plumer 2025.\r\n58\t Organisation for Economic Co-operation and Development (OECD) 2024a. Annual investment of USD 6.9 trillion in infrastruc-\r\nture will be necessary by 2030 to ensure compatibility with the Sustainable Development Goals and the Paris Agreement.\r\n59\t The Geneva Association 2019. \r\n60\t OECD and The World Bank 2019. Damage to public buildings and infrastructure is the largest disaster-related liability for \r\ngovernments.\r\n61\t\r\nStatistics Canada 2022. Around 16% of all roads, 14% of all bridges and tunnels, and 11% of water infrastructure are either in \r\nvery poor or poor condition.\r\nbe regularly updated, taking into consideration new \r\ntechnologies and lessons learnt from past disasters. \r\nSome countries, like France and the UK, have binding \r\nnational codes, while others offer guidelines. Many \r\ncountries also update their codes on a regular basis.54 \r\nHowever, adoption and enforcement by local govern-\r\nments varies significantly due to challenges including \r\ncosts, resistance from developers and builders, and \r\nlengthy implementation times. These are further \r\ndetailed in Box 3. \r\nBox 3: Hurdles to adopting and enforcing updated building codes \r\n1.\t\r\nCost constraints: Implementing new codes requires significant investment, straining local budgets. \r\n2.\t\r\nResistance to change: Builders and developers may resist due to costs or complexity issues. \r\n3.\t\r\nBalancing development and safety: Economic pressures may conflict with safety in hazard-prone areas. \r\n4.\t\r\nLack of resources: Municipalities may lack the expertise or staff to enforce new codes. \r\n5.\t\r\nPolitical pressures: Competing interests from stakeholders can delay adoption. \r\n6.\t\r\nInfrastructure upgrades: New codes may require costly infrastructure updates. \r\n7.\t\r\nAwareness: Public and builder knowledge gaps hinder support. \r\n8.\t\r\nCoordination issues: Aligning with provincial or federal codes can be challenging. \r\n9.\t\r\nImplementation delays: Adoption often involves lengthy consultation processes.  \r\n10.\t Enforcement: Ensuring compliance can be difficult without sufficient oversight.\r\nSource: National Institute of Building Sciences (NIBS)55\r\n2.1.3\t Urbanisation  \r\nUrban development approaches are also driving up the \r\nexposure and vulnerability of people and their proper-\r\nties to extreme weather events. \r\nConcreting, ecosystem loss, \r\ndensification, and outdated \r\ninfrastructure are intensifying flood \r\nand wildfire risks in urban areas.\r\nUrbanisation and floods: Concreting, soil loss, \r\nreplacement of natural ecosystems, and rapid devel-\r\nopment and densification near rivers and coasts have \r\nheightened flood risk in urban areas. Additionally, crit-\r\nical infrastructure like sewer systems is not designed \r\nfor growing urban populations. Water drainage systems \r\nare often inadequate for handling current climate \r\nconditions, let alone the anticipated future increases in \r\nrainfall due to climate change. \r\nUrbanisation and wildfires: In regions with rising wild-\r\nfire risks, urban development and other human-related \r\nfactors have increased the threat of urban wildfires. \r\nThe wildland-urban interface covers 4.7% of global \r\nland, home to nearly half the world’s population.56 In \r\nEurope, 15% of land is in the wildland-urban inter-\r\nface, with coverage varying widely across and within \r\ncountries. In Los Angeles, one in 10 properties now \r\nface ‘very high’ fire risk, with newer buildings slightly \r\nmore likely to be in wildfire-prone areas.57 Beyond \r\nlightning, wildfire ignition sources can be manmade, \r\nsuch as campfires, arson, utility incidents, and human \r\naccidents (e.g. cigarette butts, fireworks). \r\n2.1.4\t Critical infrastructure and utilities\r\nYears of underinvestment in infrastructure has led to \r\nageing and declining quality worldwide. Failure of and \r\ndamage to infrastructure make up a substantial share \r\nof annual economic losses.58,59,60,61 Globally, extreme-\r\nweather events threaten to damage essential transport \r\ninfrastructure and disrupt supply chains, with annual \r\ndirect damages to global transport infrastructure \r\nestimated at USD 15 billion. This could lead to business \r\n\r\n25\r\ninterruption, supply chain disruption, and significantly \r\ndelayed recovery and reconstruction after disasters.62\r\nFailure to maintain or inadequately upgrade infrastruc-\r\nture such as drainage systems, water facilities, and \r\nelectric utilities exacerbate extreme weather impacts.63 \r\nFor example, in California, the Pacific Gas & Electric \r\nCompany (PG&E) has been linked to several major \r\nwildfires. Utilities in California are required to report \r\nwildfire risks to the Public Utilities Commission.64  \r\n62\t United Nations Environment Programme 2024.\r\n63\t Lalonde 2024. Despite millions invested to increase sewer capacity and ongoing work to add retention basins, Montreal’s \r\nhighway and sewer systems could not handle 79 mm of rainfall in a single hour which happened in July 2024.\r\n64\t California Department of Forestry and Fire Protection 2019; Beam 2023. Also see: https://www.cpuc.ca.gov/\r\nregulatory-services/safety/emergency-reporting. \r\n65\t National Association of Home Builders 2025; Standard & Poor’s Global 2025; Building Cost Information Service 2025.\r\n66\t This has held back public-sector rebuilding projects (e.g. the National Theatre in Tokyo’s Chiyoda Ward).\r\n67\t\r\nAPCIA 2023; Swiss Re Institute 2023; Royal Bank of Canada 2023; Eurostat 2024; Martin 2024; Masuda 2024.\r\n2.2 Rising cost of rebuilding   \r\nRising inflation is a key factor driving increased insur-\r\nance losses, with building replacement costs up by \r\n26–50% in many regions since the COVID-19 pandemic \r\n(Table 6). Supply-chain issues (e.g. shipping and \r\nlogistics disruptions, raw-material shortages) during \r\nthe pandemic were further exacerbated by labour \r\nshortages, increased consumer demand, and global \r\nconflict.65 According to Kaufman (2025) tariffs also \r\nthreaten to drive up the cost of rebuilding due to more \r\nexpensive building materials.\r\nTABLE 6: RISING BUILDING REPLACEMENT COSTS \r\nCountry/region\r\nRise in costs \r\nUS\r\n40% between 2020 and 2022\r\nCanada\r\n51% since COVID-19\r\nAustralia\r\n30% compared to pre-COVID-19\r\nJapan\r\n30% since 202166\r\nEU\r\n26% for new residential buildings between 2019 and 2023\r\nSource: APCIA, Swiss Re Institute, Royal Bank of Canada, Eurostat, Martin, and Masuda67\r\nFailure to maintain or adequately \r\nupgrade infrastructure like drainage \r\nsystems and electric utilities \r\nexacerbate extreme weather impacts.\r\n\r\n26\r\nStakeholder \r\nimpacts on \r\nexposure and \r\nvulnerability \r\n3\r\n\r\n27\r\nThe risk profile of a property evolves throughout its lifecycle, shaped by the changing intensification of weather \r\nextremes and actions taken by various stakeholders (Figure 6) which can either increase or decrease its exposure \r\nand vulnerability over time. \r\nFIGURE 6: STAKEHOLDERS WHOSE ACTIONS IMPACT THE EXPOSURE AND VULNERABILTY OF PROPERTIES \r\nTO EXTREME WEATHER\r\nSource: Geneva Association\t\r\nStakeholder impacts \r\non exposure and \r\nvulnerability \r\nActions taken – or not – by homeowners, \r\ncommunities, governments and others affect \r\nthe risk profile of a property over time.\r\nHomeowner\r\nCommunity\r\nHomeowners\r\nDevelopers\r\nBuilders\r\n(Sub)contractors\r\nInspectors\r\nSurveyors\r\nArchitects\r\nEngineers\r\nRaw material \r\nsuppliers \r\nHomeowner associations\r\nReal estate agents\r\nInvestors\r\nAppraisers\r\nInspectors\r\nMunicipal governments \r\nMarket analysts\r\nCredit rating agencies  \r\n \r\nNational governments \r\nHomeowners\r\nCommercial and residential \r\nbuilding owners\r\nBanks\r\nCredit unions\r\nAppraisers\r\nMunicipal governments\r\n(social housing)  \r\nHome loan banks (US) \r\nNational governments\r\nGovernment-sponsored \r\nenterprises \r\nHousing agencies/\r\ncorporations\r\nSecondary mortgage \r\nmarket investors\r\nBuilding-code enforcement \r\nofficers/inspectors \r\nMunicipal governments\r\nEmergency services\r\nMunicipal infrastructure \r\nand utility operators\r\nState-government legislatures \r\nEnvironmental protection agencies\r\nNational governments\r\nNational building-code\r\nstandard bodies\r\nNational emergency \r\nmanagement agencies\r\nNational infrastructure \r\noperators \r\nEnvironmental protection \r\nagencies\r\nState emergency \r\nmanagement agencies\r\nState infrastructure\r\noperators \r\nMunicipal governments \r\nEmergency services \r\nMunicipal infrastructure\r\nand utility operators\r\nHomeowner associations    \r\nHomeowners\r\nNeighbourhoods\r\nProperty managers \r\nInspectors\r\nInsurance brokers \r\nPrimary Insurers\r\nState-backed re/insurance \r\npools \r\nNational government re/insurance pools\r\nScience-based resilience research institutes\r\nInvestors\r\nReinsurers\r\nNational\r\nRegional\r\nCommunity/municipality\r\nProperty\r\nDevelopment &\r\nconstruction\r\nValuation\r\nFinancing\r\nInsurance\r\nRisk-\r\nmanagement\r\nresponse &\r\nprevention\r\nZoning,\r\npermitting,\r\nbuilding\r\ncodes\r\n\r\n28\r\n3.1 \r\nHomeowners \r\nThough hazards are intensifying, quality of life68 \r\nand cost of living69 considerations continue to drive \r\npeople to move into hazard-prone areas (Figure 7).70 \r\nTraditionally, the impact of extreme weather events \r\non insurance availability and/or affordability has not \r\nsignificantly impacted homeowners’ decisions to live \r\nin a specific area. For example, research shows that \r\nbetween 2023 and 2024, more people moved into \r\nflood- and fire-prone areas in US states like Texas, \r\nFlorida, and California than moved out.71  \r\nMandatory hazard disclosures and \r\nrising insurance costs are affecting \r\nhomeowner decisions to buy or build in \r\nhazard-prone areas.\r\nIn case of a disaster, beyond experiencing loss or \r\ndamage to personal assets, homeowners may experi-\r\nence challenges such as mental and other health-re-\r\nlated issues, food insecurity, relocation, and income \r\n68\t Quality of life is driven by access to transportation and healthcare, environmental conditions, schools, employment opportuni-\r\nties, and wages.\r\n69\t Cost of living is driven by factors such as housing costs, tax burdens, insurance costs, and the price of goods and services.\r\n70\t\r\nFirst Street 2025.\r\n71\t\r\nUS Census Bureau 2024; Redfin 2024a. A US-based real estate database, operating in over 100 markets across the US and \r\nCanada, capturing 0.76% of US property sales.\r\n72\t Actuaries Institute 2024.\r\n73\t\r\nRedfin 2024b; First Street 2023.\r\ndisruption. A lack of or inadequate level of insurance \r\ncould significantly exacerbate the situation.  \r\nHomeowners are becoming more aware of the social \r\nand financial impacts of extreme weather, with rising \r\ninsurance costs now consuming a larger share of \r\ntheir income (Figure 7). For example, in Australia, over \r\n15% of homeowners pay insurance costs equal to or \r\nexceeding one month’s gross income.72 Recent studies \r\nin the US suggest that frequent weather-related disas-\r\nters, limited access to private insurance, federal- and \r\nstate-level requirements for mandatory insurance, and \r\nrising insurance rates linked to risk-based pricing are \r\nstarting to influence homeowners’ decisions to avoid \r\nhazard-prone areas.73 \r\nOwnership of a property may change throughout its \r\nlifecycle. Homeowners’ investments in maintenance, \r\nupgrades, resilience retrofitting, and rebuilding could \r\nimpact a property’s exposure and vulnerability to extreme \r\nweather. Key hurdles to implementing resilience retrofits \r\ninclude inability to assess risks, lack of access to expert \r\nadvice on what measures to take, and lack of incentives \r\nand availability of funding (disposable income, loans, or \r\ngrants) to implement them (Figure 7).\r\nFIGURE 7: FACTORS INFLUENCING HOMEOWNERS’ DECISIONS\r\nSource: Geneva Association\r\nTraditionally, homeowner\r\nchoices are driven by\r\n1.\r\nQuality of life\r\n2.\r\nCost of living\r\nHomeownersʼ choices are \r\nincreasingly impacted by\r\n1.\r\nExperiencing disasters\r\n2.\r\nAccess to property-level \r\nrisk information\r\n     Real-estate databases\r\n     Mandatory hazard \r\n     disclosure \r\n3.\r\nMandatory insurance \r\nand high prices\r\n \r\n   \r\nHomeowners need to\r\n1.\r\nUnderstand risks\r\n2.\r\nHave expert guidance on what \r\nto do to retrofit homes\r\n3.\r\nBe incentivised to invest in \r\nretrofitting\r\n4.\r\nHave access to funding\r\nPurchasing a \r\nnew home\r\nRetrofitting an\r\nexisting home\r\n\r\n29\r\nDifficulty assessing risk, limited expert \r\nguidance, and insufficient incentives or \r\nfunding affect homeowners’ decisions \r\nto retrofit their property.\r\nHouse prices drop following a disaster. Homeowners \r\nthat lack appropriate levels of insurance and/or financial \r\nresources are more likely to sell their property, espe-\r\ncially with rebuilding costs rising. In the US, ‘disaster \r\ninvestors’ – mainly small to mid-sized real estate \r\ndevelopers – have profited from catastrophes by buying \r\n74\t\r\nNational Association of Realtors 2019; Putzier 2019; Federal Housing Finance Agency 2023. For example, in the US, there \r\nwere no persistent decreases in the price of homes affected by Hurricane Sandy\r\n75\t\r\nBuckles 2023; Ministry of Land, Infrastructure, Transport and Tourism of Japan 2020; CMLayers 2024.\r\n76\t\r\nNational Institute of Building Sciences 2020.\r\n77\t\r\nFORTIFIED is a building certification standard to strengthen homes against extreme wind and hail. See: https://fortifiedhome.org/ \r\n78\t\r\nAlabama Center for Risk and Insurance Research 2021.\r\nsuch damaged homes at low prices, making cosmetic \r\nupgrades, and reselling them, attracting buyers to high-\r\nrisk areas and driving up prices of high-risk properties.74 \r\nHowever, this trend is changing as homebuyers become \r\nincreasingly aware of a property’s risk due to ‘manda-\r\ntory hazard disclosure laws’, which require sellers to \r\nreport previous disasters that have impacted a property \r\nand the mitigation measures that were implemented \r\n(Figures 7, 8). Disclosure laws vary by jurisdiction, with \r\naround half of US states requiring property flood history \r\nand current insurance status. Similar requirements exist \r\nin other countries such as France, Japan, and Australia \r\n(New South Wales).75 \r\nFIGURE 8: TRENDS IN DEMAND-DRIVEN HOUSING PRICES AFTER A DISASTER \r\nSource: Geneva Association\r\nHomeowners could be incentivised to invest in prop-\r\nerty-level retrofits through increased returns on their \r\ninvestments. For example, in the US, it has been shown \r\nthat building with updated codes can save up to USD 11 \r\nin future losses for every USD 1 invested.76 Furthermore, \r\nparticipation in FORTIFIED building retrofits,77 specifi-\r\ncally the Strengthen Alabama Homes programme, can \r\nincrease house values by approximately 7%.78\r\n3.2 Communities \r\nCommunity organisations, homeowners’ associations, \r\nand neighbourhood groups can explore sources of \r\nrisk that impact homes in their community. They can \r\nundertake actions that can be taken collectively to \r\nreduce risks for all. Examples of collective suburban \r\ncommunity efforts are already in evidence. For instance, \r\nthe Insurance Institute for Business & Home Safety in \r\nthe US provides detailed risk reduction strategies that \r\nenable homeowners to assess the wildfire vulnerabilities \r\nIn a hazard-prone \r\nregion\r\nEmergence \r\nof ‘disaster \r\ninvestorsʼ\r\nDamaged \r\nor \r\ndestroyed\r\nArtificial increase \r\nin property value, \r\n~6 months\r\nHome sold at \r\nhigher price\r\nPrices recover \r\nafter several \r\nmonths\r\nExtreme \r\nweather \r\nevent\r\nCosmetic \r\nupgrades without \r\nresilience \r\nretrofits and \r\n‘flippingʼ\r\nHome may be sold at a lower \r\nprice due to low or no insurance \r\nand rising rebuilding costs\r\nTemporary drop in price of \r\nhomes impacted by disaster\r\nThis cycle is being \r\ndisrupted, with prices \r\nof high-risk properties \r\ndropping due to:\r\n• Mandatory hazard \r\ndisclosures\r\n• Mandatory insurance \r\nand rising premiums\r\n\r\n30\r\nof their home and neighbourhood and to lay out a path \r\nto reduce their risk.79 \r\nOther initiatives may include lobbying local and \r\nstate governments to undertake resilience initiatives, \r\nenforcing regulations on developers and contractors, \r\nand opposing urbanisation efforts such as densification. \r\nCommunities could also strengthen collaboration with \r\nlocal government to protect public buildings offering \r\ncommunity services.\r\n3.3 Governments\r\nGovernments play a central role in protecting citizens \r\nagainst disasters caused by natural and man-made \r\nhazards. The ability of different layers of government to \r\nenable and finance resilience measures at the local and \r\nproperty levels may vary depending on the country’s \r\ngovernance system.80  \r\n3.3.1\t Local governments and related agencies\r\nLocal governments and their agencies must respond \r\nto rising demand for affordable housing while avoiding \r\ndevelopment in high-risk areas. They manage zoning, \r\npermits, urban design, land alterations, and building \r\ncode enforcements. Disasters result in reduced reve-\r\nnues, diverted funds for reconstruction, higher social \r\nrecovery costs, increased borrowing, potential damage \r\nto essential infrastructure, and possible impacts on their \r\ncredit rating.\r\nLocal governments face the task of \r\nbalancing housing needs avoiding \r\ndeveloping in hazard-prone areas, \r\nmaking risk-based planning essential \r\nfor safer development.\r\nLocal governments rely primarily on property taxes \r\nfor revenue. Without risk-based zoning, this reliance \r\nhas allowed more homes to be built in hazard-prone \r\nareas. In the event of disasters, local governments often \r\ndepend on national or federal government post-disaster \r\naid to cover the resulting damage costs.\r\n79\t\r\nIBHS announced the ’Wildfire Prepared Neighbourhoods’ programme on top of the ’Wildfire Prepared Homes’ programme. For \r\nmore details, see: https://www.linkedin.com/feed/update/urn:li:activity:7310994337771732993/\r\n80\t Wikipedia 2025. There are two types of governance system: (1) Unitary states, where the power is concentrated at the \r\nnational level, also granting executive, legislative, and judicial powers to municipal and regional levels; (2) Federal states, \r\nwhere these powers are shared among federal, state/provincial, and local governments. The US, Canada, Australia, Austria, \r\nBelgium, and Germany are federal states, while other EU countries, the UK, and Japan are unitary states.\r\n81\t\r\nGeneva Association 2021.\r\n82\t Geneva Association 2020c; Public Safety Canada 2025.\r\n83\t Alabama Center for Risk and Insurance Research 2021.\r\n84\t Federal Emergency Management Agency (FEMA) 2008.\r\n85\t FEMA 2008, 2020.\r\n86\t Liao and Kousky 2021.\r\nLocal governments continue to face lawsuits from \r\nhomeowners and communities for negligence or failure \r\nto adapt to climate change (Appendix 2). While many \r\ncases have been dismissed or withdrawn, litigation \r\ncontinues to increase.81\r\nRisk-based land zoning, climate-resilient urban plan-\r\nning, updated building codes, and approving contrac-\r\ntors and builders who conform to building beyond \r\nminimum resilience/retrofit standards in their jurisdiction \r\n(see developer and contractors below), could help local \r\ngovernments prevent risks for new constructions.  \r\nReducing vulnerabilities in existing buildings in hazard-\r\nprone areas remains a challenge as it requires significant \r\ninvestment in retrofits based on updated building codes. \r\nIncreasingly, local governments are incentivised to \r\ndevelop and implement resilience plans. Reasons for \r\nthis include:\r\n\t\r\n●Reduced national/federal funding due to post-\r\ndisaster aid reforms that shift risk prevention \r\nresponsibilities to local governments82  \r\n\t\r\n●Increased property values from improved local \r\nresilience, leading to higher property tax revenues83  \r\n\t\r\n●Higher return on investment from ex-ante resilience \r\nmeasures in infrastructure (e.g. USD 1 spent saves \r\nUSD 6 in post-disaster costs)84\r\n\t\r\n●Preventing lower credit rating from failing to invest \r\nin resilience, which could make borrowing more \r\ndifficult85\r\n\t\r\n●Avoiding litigation risks.86\r\n3.3.2\tState/provincial governments\r\nIn countries with federal government systems, the \r\nstate/provincial layer plays a critical role in establishing \r\nresilience requirements, restrictions on building in \r\nhigh-risk zones, adoption of building codes, maintaining \r\nand enforcing resilience of state-owned infrastructure \r\n(in coordination with the federal government), availing \r\nfunding, and enabling state and local projects. \r\n\r\n31\r\nWhile state/provincial governments have various \r\nrevenue sources, in some countries, they have the \r\nauthority to levy and collect property taxes, for example \r\nin the US, Canada, and Australia. Similar to local govern-\r\nments, this is both a deterrent as well as an incentive to \r\nsupport and implement resilience measures. Disasters \r\nnot only result in reduced revenues, they also lead to \r\ndiverted funds for reconstruction, increased borrowing, \r\npotential damages to essential infrastructure, and \r\nchanges to the credit rating of the state/province. State \r\ngovernments can therefore benefit from similar incen-\r\ntives to local governments. \r\n3.3.3\tNational/federal governments \r\nNational/federal governments coordinate, fund, and \r\nsupport large-scale projects that enhance resilience \r\nthrough major structural and non-structural solutions. \r\nThey establish disaster response frameworks, issue \r\nofficial alerts and warnings, provide post-disaster aid, \r\nand deploy federal/national teams when state and local \r\nresources are insufficient. Some governments have \r\nreformed their national post-disaster aid programmes \r\nto transfer responsibility for resilience measures to local \r\ngovernments as a precondition for post-disaster funding. \r\nGovernments could develop forward-looking national \r\nstrategies to identify and implement major projects that \r\nhave a large-scale impact on managing local risks. \r\nIncentives for investing in local resilience include a \r\nhealthy market-based insurance system, avoidance \r\nof risk transfer to taxpayers through the overuse of \r\ngovernment-backed insurance pools, reduced post-dis-\r\naster spending, reduced litigation risks (Appendix 2), \r\nand political benefits.87\r\n3.4 Developers and contractors  \r\nDevelopers must adhere to local building codes. While \r\naiming to keep costs low, they typically lack incentives to \r\nexceed minimum standards designed for life and safety. \r\nLocal governments could increase monitoring and \r\nintroduce incentives or stricter regulations for developers \r\nand contractors that go beyond minimum requirements. \r\n3.5 Public and private infrastructure owners \r\nand utilities \r\nWithout retrofits and proactive maintenance to address \r\nextreme weather risks, private and public utilities and \r\ninfrastructure owners could exacerbate local risks. \r\n87\t Garside and Zhai 2002; Sabin Center Climate Change Litigation Database 2005.\r\n88\t Geneva Association 2019; OECD 2024a.\r\n89\t Tigue 2024; Association of State Dam Safety Officials 2024; Swagath 2023.\r\n90\t Almasy and Holcombe 2019.\r\n91\t\r\nSouthern California Edison 2025.\r\n92\t Standard & Poor’s Global 2019.\r\nFor example, poor maintenance of electric lines can \r\ntrigger wildfires, as seen with PG&E in California.88 \r\nInfrastructure damage from extreme weather also \r\nincreases risks to surrounding properties, and critical \r\nsystems like sewage and drainage often cannot handle \r\nincreased rainfall, as shown by recent flash floods.89\r\nFailures have led to lawsuits, such as the 2019 PG&E \r\ncase, which resulted in a USD 13.5 billion settlement for \r\nwildfire victims. Investing in retrofits and maintenance \r\ncan reduce such litigation risks.90 Utilities also have \r\nan incentive to protect their equipment from being \r\ndestroyed and/or failing by investing in resilience \r\nmeasures.91 Failure to do so could also lead to lowering \r\nof credit ratings.92\r\n3.6 Other specialised agencies\r\nSpecialised agencies play a critical role in managing \r\nexposure and vulnerabilities to weather-related hazards. \r\nFor example, river-basin authorities oversee water \r\nresources, flood control, environmental protection, and \r\ncommunity needs, coordinating with local, state, federal, \r\nand cross-border entities. Forest conservation authori-\r\nties play a key role in reducing wildfire risks. \r\n3.7 Credit rating agencies\r\nIncreasingly, credit rating agencies consider factors \r\nlike disaster preparedness and response capacities, \r\nadaptation plans, resilience investments, contingency \r\nfunds, and insurance into account when setting credit \r\nratings for governments, utilities, and companies. These \r\nstrategies are often evaluated under the umbrella of \r\nsovereign risk and environmental and climate-related \r\nrisks, which can impact a country’s economic resilience \r\nand fiscal health. Sovereign credit ratings have signif-\r\nicant implications for a jurisdiction’s ability to borrow \r\nmoney, as they directly influence the cost of borrowing, \r\nthe terms of debt, and investor confidence in govern-\r\nment bonds. Credit ratings are also applied to different \r\ntypes of financial securities. They can affect the ability \r\nof mortgage lenders to securitise and sell mortgages, as \r\nwell as to issue new loans. Credit rating can also affect \r\nthe value of investment portfolios.\r\nCredit rating agencies can drive local \r\nresilience by factoring it into government, \r\nutility, and corporate ratings.\r\n\r\n32\r\n3.8 Property valuation, mortgage, and lending stakeholders\r\nStakeholders in the property valuation and mortgage and lending sectors could influence the behaviour of home-\r\nowners. According to 2021 data, 40.1% of homeowners in the US, 18.8% in the EU, and 27.6% in Japan relied on \r\nmortgages to finance the purchasing of their property.93 Box 4 provides a simplified description of how mortgage \r\nsystems operate around the world. \r\n93\t OECD 2024b.\r\n94\t Can generally differ, based on their legal foundations (1) Common (Anglo-Saxon) law – Used in countries like the UK, the US, \r\nCanada, and Australia; (2) Civil l(Napoleonic) law – Used in most EU countries (e.g. Germany) and many Asian nations like \r\nJapan.\r\n95\t\r\nFederal Housing Finance Agency 2011 and Kaysen 2025. For example, in the US, Fannie Mae and Freddie Mac (two main GSEs) \r\nhave had a complex history of privatisation dating back to the late 20th century. However, this was effectively reversed with the \r\n2008 Global Financial Crisis, as both companies were placed under government conservatorship. Since then, the debate has \r\ncontinued about whether they should be fully privatised, restructured, or remain under some form of government control. The \r\ntrajectory of these institutions is still evolving, and their role in US housing finance remains a critical issue for policymakers. In \r\nearly 2025, the US administration reinforced the need for Freddie Mac and Fannie Mae to be privatised in the future. Without US \r\ngovernment backing, GSEs and MBSs could become riskier investments, causing mortgage rates to increase.\r\n96\t Levitin and Watson 2023; Reserve Bank of Australia 2017.\r\nBox 4: A simplified overview of mortgage and lending systems\r\nMortgage markets are made up of the primary market, where borrowers obtain mortgages, and the secondary \r\nmarket, where lenders sell mortgages to increase liquidity and investors use them as collateral, transferring risks \r\nto capital markets.94\r\n•\t\r\nThe primary market consists of banks, credit unions, mortgage brokers, and savings institutions. When \r\na homeowner (borrower) decides to purchase or build a property, they apply for a mortgage to finance it. \r\nThe lender approves the loan based on the borrower’s credit profile (e.g. credit score, income, debt-to-\r\nincome ratio, down payment, employment history), a property valuation report and market conditions (e.g. \r\ninterest rates, housing trends, unemployment, inflation). Mortgage approval is subject to securing property \r\ninsurance and, sometimes, loan default insurance. Loan terms usually range from 10–30 years, depending \r\non the jurisdiction. Borrowers may refinance every 3–5 years or sell the property during this period.\r\n•\t\r\nIn the secondary market lenders sell mortgages to loan aggregators, who bundle them into mort-\r\ngage-backed securities (MBS) or issue covered bonds. These are then offered to investors, shifting \r\nmortgage risks to capital markets. The US issues only MBS, covered bonds are preferred in the EU, and \r\nCanada, Australia, and Japan use both. Aggregators, including Government-Sponsored Enterprises (GSEs), \r\ninvestment banks, and brokers, support the market by purchasing and guaranteeing loans, transferring \r\nrisks to investors such as pension funds, mutual funds, insurance companies, and private investors. GSEs \r\nare used in the US, Canada, and Japan, transferring risks from lenders to the government and then to \r\ninvestors.95 \r\nSource: Levitin and Watson and Reserve Bank of Australia96\r\nThere are various nuances in the way valuations, mortgages, and insurance relate to homeowner choices (Figure 9). \r\nTraditionally, property valuation and mortgage systems consider the borrower’s credit status and market conditions \r\nfor mortgage decisions; they typically do not consider the property’s extreme weather risks and assume that these \r\nrisks are transferred to insurers through borrowers’ insurance.\r\n3.8.1\t Certified property appraisers \r\nAs a standard practice, a property valuation report is required for a mortgage appraisal and lending decision, \r\nprepared by a qualified certified property valuer or appraiser. The property valuation report is commissioned by \r\nthe lender, or sometimes the borrower. It is prepared by a certified property appraiser and offers an independent \r\nassessment of the property’s market value, the physical state of the property, and local market conditions. Valuation \r\nreports typically focus on the ‘open market value’, which is the price a property would receive in the market. Notably, \r\nthe report and subsequent mortgage appraisal process do not consider the insured value (cost of replacement or \r\nrebuilding), nor the property’s exposure and vulnerability to extreme weather.\r\n\r\n33\r\nFIGURE 9: LINKS BETWEEN PROPERTY VALUATION, MORTGAGE, AND INSURANCE SYSTEMS\r\nSource: Geneva Association\r\n1.\r\nDecision to buy and/\r\nor build a property\r\nHomeowners generally decide\r\nto build or buy based on:\r\n•   Cost of living\r\n•   Quality of life\r\n2.    Apply for a mortgage\r\n4.    Verifying insurance renewals\r\n3.    Lenders assess and\r\n        approve mortgage\r\nPrimary mortgage market\r\nSecondary mortgage market\r\n•   Mortage appraisal considers personal credit and market conditions.\r\n•   Property valuation reports used for mortgage appraisal are based on ‘open market  \r\n     valueʼ (the market price) rather than the ‘insured valueʼ (the cost of replacement).\r\n•   Insurance is required by law and/or lender\r\n•   Lenders do not consider property risk, assuming it is transferred to insurers  \r\n     through borrowersʼ annual insurance policies.\r\n•   Depending on the jurisdiction, lenders may impose requirements for insurance.\r\n       Borrowers initially qualify for a mortgage based on their ability to pay back the \r\n          loan and insurance costs in the first year.\r\n       If insurance prices are not risk based, insurance requirements will not reflect  \r\n          actual risks. \r\n       Lendersʼ insurance requirements generally do not consider rising costs or\r\n         declining property values.\r\n5.     Load aggregators\r\n \r\n  securitise them\r\n6.   Mortgage-backed securities (MBS) and \r\n \r\n  covered bonds sold to investors \r\nGovernment-sponsored enterprises (GSEs) (in US, Canada and Japan):\r\n•   Package up mortgages into MBS\r\n•   Guarantee the repayment of the mortgages, assuming properties are backed by insurance \r\nBanks and Mortgage institutions issue covered bond for qualified mortgages (EU, Australia, \r\nCanada and Japan)\r\nInvestors buy MBS and/or invest in covered bonds depending on the jurisdiction\r\n•   US (MBS only); EU (Prefer covered bonds); Canada, Australia, and Japan (use both)\r\nBeyond originations, homeowners:\r\n•   May opt out of insurance due to unaffordability or the insurance may no longer be available, leading to \r\n     mortgage delinquencies in the case of an extreme weather event\r\nSome countries have established robust verification processes (e.g. US):\r\n•   To verify annual insurance\r\n•   Enact a ‘force-placedʼ insurance policy in case the borrowerʼs insurance is cancelled\r\n•   If the borrower fails to pay, a risk-mitigation measure such as foreclosure may happen\r\nIn some other countries, while mandated by law to verify insurance annually, lenders verify insurance only at \r\nthe point of origination and not thereafter. This could lead to blind spots about insurance cancellation and \r\nmortgage defaults following disasters.\r\n\r\n34\r\n3.8.2\tMortgage lenders\r\nInsurance is often required by law and/or by lenders to \r\nensure that borrowers maintain coverage throughout the \r\nmortgage term. This aims to transfer property risks (e.g. \r\nthe cost of rebuilding in case of a disaster) to insurers, \r\nleaving lenders with only credit risks (Table 7).97 Studies \r\nshow that lenders currently lack insight on property \r\nrisks and insurance challenges.98\r\nLenders often require insurance to \r\nensure that borrowers maintain coverage \r\nthroughout the mortgage term, leaving \r\nlenders with only credit risks.\r\nSpecifically:\r\n\t\r\n●Borrowers initially qualify for a mortgage based on \r\ntheir ability to afford the loan payment and insurance \r\ncosts in the first year of coverage. There are no \r\nincentives or mandatory requirements for lenders \r\nto assess and factor in property risks in mortgage \r\nappraisals or for rate setting. In other words, two \r\nborrowers with identical credit conditions and home \r\ntypes could receive the same mortgage, regardless \r\nof the level of extreme weather risk of their \r\nrespective properties.  \r\n\t\r\n●Lenders set broad requirements for the level of \r\ninsurance coverage required for a mortgage based \r\non property valuation and insurance premiums. \r\nHowever: \r\n\t\r\n‒ If risk-based insurance is not used, this can \r\nbias insurance requirements. Rising insurance \r\npremiums in subsequent years could impact \r\nborrowers’ abilities to make periodic loan \r\npayments.  \r\n\t\r\n‒ According to Danko and Merlino (2024), higher \r\nannual home-owenership costs linked to rising \r\ninsurance premiums and costs of rebuilding \r\ncould also put downward pressure on property \r\nvalues, further undermining a borrower’s financial \r\nsituation and increasing the risk of mortgage \r\ndelinquency when a disaster happens. \r\n\t\r\n●Monitoring and verification of borrowers’ annual \r\ninsurance policies vary in different jurisdictions.\r\n\t\r\n‒ Some countries have set up robust mechanisms \r\nwith built-in mitigation measures to protect lenders \r\n97\t\r\nMortgage loans typically range from 10–30 years, depending on the jurisdiction. Borrowers may choose to refinance their \r\nloans e.g. every three to five years or sell the property.\r\n98\t Fontana et al. 2024.\r\nand investors, but not necessarily borrowers. For \r\nexample, in the US:\r\n•\t ‘Servicers’, or in some cases lenders, perform \r\nmandatory annual insurance checks (insurance \r\ncompanies notify servicers if borrowers’ \r\ninsurance is not renewed). Servicers manage  \r\nmortgages after the mortgage has been issued.\r\n•\t In some cases (e.g. if downpayment is less \r\nthan 20%), borrowers are required to use \r\nan 'escrow account’ to ensure that property \r\ntaxes and insurance payments on a home are \r\ncollected and paid. This involves holding assets \r\nor money by a neutral third party.\r\n•\t According to the Consumer Financial Protection \r\nBureau (2023), in case the borrower fails to \r\nrenew their annual insurance, servicers or \r\nlenders could put in place a ’forced-placed‘ \r\ninsurance policy, which generally costs a \r\nlot more than a regular insurance contract, \r\nto protect the lender or mortgage owner (if \r\nthe mortgage has been purchased by another \r\ninstitution) and not the borrower.\r\n•\t If the borrower fails to pay, a risk-mitigation \r\nmeasure such as foreclosure could be initiated. \r\n•\t Collection and analysis of data on rising \r\ninsurance payments, insurance cancellations, \r\nand related mortgage defaults could help with \r\nthe development of preventive measures for \r\nall. This information, combined with mandatory \r\nhazard disclosure rules, could also help \r\nraise awareness among borrowers to avoid \r\npurchasing high-risk properties.\r\n\t\r\n‒ In some countries lenders may not always verify \r\nborrowers’ annual insurance renewals after \r\nthe loan originations, as thoroughly. According \r\nto the Actuaries Institute (2024), this is mainly \r\nbecause ongoing monitoring is seen as too \r\ncostly, especially when loan-to-value ratios \r\ndecrease over time. In some countries, this \r\nservice is provided by third parties. This could \r\nlead to blind spots on insurance cancellation and \r\nrelated mortgage defaults and a lack of data to \r\nsupport the development of preventive measures \r\nfor lenders (or mortgage owners), GSEs, and \r\ninvestors in secondary markets.\r\n\r\n35\r\nTABLE 7: INSURANCE REQUIREMENTS FOR MORTGAGES IN SELECT COUNTRIES  \r\nCountry\r\nIs insurance required by law or lender?\r\nNorth America\r\nCanada\r\nLaw: Mortgage default insurance (when down payment is less than 20%) \r\nLender: Typically homeowners’ insurance for catastrophic loss\r\nUS\r\nLaw: Mortgage default insurance (when down payment is less than 20%) and or/flood insurance \r\n(for government-backed mortgages in areas with high flood risk)\r\nLender: Typically homeowners’ insurance\r\nAustralia\r\nAustralia\r\nLender: Typically mortgage default and homeowners’ insurance\r\nAsia\r\nJapan\r\nLender: Typically life insurance as collateral\r\nEurope\r\nFrance\r\nLaw: Civil liability insurance for condominiums\r\nLender: Typically life insurance as collateral and homeowners’ insurance\r\nGermany\r\nLender: Typically homeowners’ insurance and/or life insurance as collateral\r\nItaly\r\nLaw: Fire insurance\r\nLender: Typically life insurance as collateral and homeowners’ insurance\r\nSpain\r\nLaw: Fire insurance \r\nLender: Typically homeowners’ insurance\r\nUK\r\nLender: Typically homeowners’ insurance\r\nSource: Consumer Financial Protection Bureau, FloodSmart, Government of Canada, Maunder, Engel&Volkers, Banco De Espana, EXS Seguros, \r\nHSBC, Insurance Council of Australia, AtHome and Service Public France99\r\n99\t Consumer Financial Protection Bureau 2023; FloodSmart 2024; Government of Canada 2023b; Maunder 2024; \r\nEngel&Volkers 2024; Banco De Espana 2024; EXS Seguros 2024; HSBC 2024; Insurance Council of Australia 2021; AtHome \r\n2023; Portugal Residency Advisors 2024.\r\n100\t Standardised Climate Scenario Exercise. See: https://www.osfi-bsif.gc.ca/en/data-forms/reporting-returns/\r\nstandardized-climate-scenario-exercise   \r\n101\t Bank of Canada 2023.\r\n102\t Commonwealth Bank of Australia 2023; Reserve Bank of Australia 2024.\r\n103\t US Congressional Budget Office 2023.\r\n104\t Bank of Canada 2023; OSFI 2023.\r\nDriven by financial regulators, large banks have \r\nconducted voluntary assessments of the impact of risks \r\non their mortgage portfolios, for example in Canada \r\n(Box 5)100,101 and Australia.102 In the US, a Congressional \r\nBudget Office report found that federally backed mort-\r\ngages cover properties that are expected to incur USD \r\n190 billion in flood damage over 30 years.103 \r\nBox 5: Modelling physical climate risk of Canadian banks’ mortgage portfolios\r\nIn 2023, a study by the Office of the Superintendent of Financial Institutions (OSFI), the Bank of Canada, and \r\nEnvironment and Climate Change Canada (ECCC), five provincial financial regulators and nine P&C insurers \r\nanalysed loan-level data for 7.7 million residential properties. Key findings included that high household lending in \r\nflood zones increases financial risks, and insufficient insurance worsens this.\r\nFollowing the release of its Guideline B-15 on Climate Risk Management in 2023, requiring financial institutions to \r\nassess climate-related risks and develop a ‘Climate Transition Plan’, in 2024, OSFI partnered with Riskthinking.AI \r\nto provide climate risk data to around 400 financial institutions. Riskthinking.AI provided flood risk data for financial \r\ninstitutions of 11 metropolitan areas to georeference properties and assess their likelihood of future riverine and \r\ncoastal flooding. The results are forthcoming. \r\nSource: Bank of Canada and OSFI104\r\n\r\n36\r\n3.8.3\tGovernment-sponsored enterprises \r\nConsultations with experts in the secondary market \r\nrevealed that:\r\n\t\r\n●Assessing the fair market value of the assets used \r\nto secure a loan is backward-looking, with physical \r\nclimate risks and insurance costs not factored in. \r\nWhile GSEs are working to assess the materiality of \r\nthese risks, they have not yet developed suitable \r\nmethodologies for risk assessment, which would \r\nincentivise the market to manage these risks.105\r\n\t\r\n●While impacts from extreme-weather events can \r\nbe significant, they are often localised and appear \r\nless severe when assessed across entire mortgage \r\nportfolios.\r\n\t\r\n●Most extreme weather events have coincided with \r\nrising property prices, causing only transient impacts \r\non mortgage delinquencies and the cost of home \r\nownership. \r\n\t\r\n●There is a lack of data on delinquencies linked to \r\ninsurance challenges given the historical stability of \r\ninsurance rates and availability. \r\n3.8.4\tMortgage regulators\r\nDifferent parts of the mortgage system may be regu-\r\nlated by different bodies. Discussion with regulators \r\nconfirmed that new methodologies are required to \r\nassess the extreme weather risks of properties, using a \r\nforward-looking approach that takes hazard character-\r\nistics under different scenarios into consideration. In the \r\nUS, for example, the Federal Housing Finance Agency106 \r\nhas noted that its methodology lacks specific proce-\r\ndures for monitoring lenders’ compliance.107 \r\n3.9 Market-based insurance stakeholders\r\nP&C re/insurers take on risks that are created by rising \r\nextreme weather on the one hand, and significantly \r\n105\t Federal Housing Finance Agency 2024; Based on interviews and discussions with mortgage experts in the US. Importantly, \r\nGSEs provided guidance on ‘Climate-Related Risk Management’ by the Federal Housing Finance Agency in 2024 after an \r\nextensive fact-finding effort but the guidance was rescinded on 25 March 2025 (Federal Housing Finance Agency 2025). \r\nMoreover, as of 1 April 2025, Freddie Mac will begin qualifying new borrowers based on their ability to afford flood insurance \r\npayments under a modernised rate-setting methodology implemented by the National Flood Insurance Programme in 2021, \r\ncalled Risk Rating 2.0 (Freddie Mac 2025).\r\n106\t FHFA provides supervision and regulations for US GSEs. \r\n107\t Federal Housing Finance Agency 2024.\r\n108\t Geneva Association 2018b, 2024a. \r\n109\t Swiss Re 2015.\r\n110\t Geneva Association 2018c. \r\n111\t Global Reinsurance Forum 2024. In some countries, government trade barriers limit reinsurers’ market access, restricting \r\ndomestic insurers’ risk transfer capacity.\r\n112\t This allows insurers to protect their balance sheet and reduce earnings volatility and claims severity.\r\n113\t https://www.artemis.bm/library/what-are-insurance-linked-securities/\r\n114\t Gallagher Re 2024.\r\nexacerbated by the decisions and processes of various \r\nstakeholders who directly and/or indirectly impact the \r\nvulnerability and exposure of properties on the other. By \r\nproviding insurance, re/insurers help society cope with \r\nthe financial impacts of rising weather risks.\r\n3.9.1\t Primary insurers\r\nProtecting properties against natural catastrophes \r\nthrough risk pooling is central to the P&C insurance \r\nbusiness model.108 Insurance allows individuals or \r\nbusinesses to transfer potential losses to insurers in \r\nexchange for regular premiums.109 This process is \r\nbased on pooling premiums from multiple policyholders \r\nto cover the losses of a few, helping to minimise the \r\nfinancial impact on any single party. They use their risk \r\nassessment expertise to ensure solvency while covering \r\nclaims.110 Rising risks drive insurers to raise premiums \r\nto ensure they can cover losses, be more selective in \r\nunderwriting, limit offerings, or exit markets.  \r\n3.9.2\tReinsurers\r\nReinsurers play a critical role in creating conditions \r\nthat enable primary insurers to transfer risks to reinsur-\r\ners.111,112 Reinsurance allows local insurers to offer higher \r\ncoverage limits, take on more clients and remain solvent \r\nin the face of catastrophic events. Further, reinsurers \r\ndiversify local risk by transferring it globally. The \r\nprinciple of uncorrelated risk pooling reduces volatility \r\nand allows reinsurers to absorb shocks without requiring \r\nexcessive pricing from any one location. Reinsurers \r\ndiversify risks by geography and type, passing some on \r\nto other reinsurers or capital markets through risk secu-\r\nritisation, using alternative risk transfer (ART) instru-\r\nments such as catastrophe (CAT) bonds. It should be \r\nnoted that primary insurers also directly transfer some \r\nof their risks to capital markets with ART mechanisms.113\r\nOver the past decade, increasing natural catastrophe \r\nlosses and rising asset values have driven up rein-\r\nsurance demand and, globally, reinsurance capacity \r\ncontinues to grow.114 However, for some perils in certain \r\nlocalities (Florida), rising claims have led to reduced \r\n\r\n37\r\nreinsurance115 and the temporary exit of some rein-\r\nsurers. This has resulted in price increases and gaps in \r\nprimary insurers’ risk transfer capacity.116 \r\n3.9.3\tSupporting local resilience to reduce the \r\nexposure and vulnerability of properties \r\nRe/insurers invest significantly in understanding the \r\ndrivers of rising risks and economic losses from \r\nextreme weather, and develop and offer solutions to \r\nhelp homeowners, communities, and governments take \r\nresilience measures with high local impact. For example:\r\n\t\r\n●Re/insurers invest in catastrophe risk modelling tools, \r\nwhich have revolutionised pricing, underwriting, \r\nand portfolio management.117 These models are now \r\nwidely used by governments, financial institutions, \r\nregulators, and other sectors.118 Efforts are underway \r\nto develop next-generation, forward-looking \r\nstochastic climate risk models.\r\n\t\r\n●The industry also invests in research & development \r\nto better understand extreme weather events, \r\ntheir intensification due to climate change, and the \r\ncauses of rising economic and insured losses. This \r\nincludes in-house research (e.g. Swiss Re Institute, \r\nMunich Re’s NatCatSERVICE) and funding academic \r\nstudies (e.g. AXA Research Fund, Allianz Climate \r\nRisk Award). Re/insurers support science-based \r\norganisations, such as the Canadian Intact Centre on \r\nClimate Adaptation and the US Insurance Institute for \r\nBusiness and Home Safety, which provide solutions \r\nfor homeowners, businesses, local governments, \r\nand communities. The findings from these efforts are \r\ntranslated into actionable guidelines and distributed \r\nthrough innovative channels to target audiences.\r\nWhile re/insurers are investing in \r\nresearch to understand the causes of \r\nrisks, develop resilience measures and \r\ninnovate their products and services, \r\nthey cannot solve the challenges alone.\r\n\t\r\n●Re/insurers engage with building code development \r\nand standard-setting bodies to update codes and \r\n115\t Harris 2025.\r\n116\t Stephenson 2023.\r\n117\t Geneva Association 2018b.\r\n118\t Ibid\r\n119\t Geneva Association 2022a. Projects being developed in British Columbia’s Fraser River Delta, southern Ontario, and Quebec, \r\nfor example.\r\n120\t However, for parametric triggers, the payout may not align with the insured’s actual loss – referred to as basis risk.\r\n121\t Harper et al. 2024 \r\n122\t Developed by Swiss Re, Risk Management Solutions and RE:focus partners, funded by the Rockefeller Foundation.\r\n123\t Vajjhala and Rhodes 2015.\r\n124\t National Association of Insurance Commissioners 2024. In the US, a public database of those states is provided by the \r\nNational Association of Insurance Commissioners.\r\nactively advocate for their adoption and enforcement \r\nby state and local governments.\r\n\t\r\n●In collaboration with conservation organisations, \r\nre/insurers invest in restoring nature-based \r\nsystems to enhance resilience to extreme weather. \r\nFor example, the Nature Force, involving 15 \r\ninsurers and Ducks Unlimited Canada, invested in \r\nwetland restoration to reduce flood risk in urban \r\ncommunities.119\r\n\t\r\n●Re/insurers have developed parametric products \r\nthat trigger payouts based on physical parameters \r\n(e.g. wind speed, precipitation) once a threshold \r\nis met.120 Initially used in emerging markets, these \r\nsolutions are now being adopted in advanced \r\neconomies, offering immediate payouts after an \r\nevent, unlike traditional indemnity insurance, which \r\nhas delayed claims settlements.121 Re/insurers are \r\nalso developing parametric solutions to protect \r\ncoral reefs, mangroves, wetlands, and forests from \r\nstorm surges, floods, and wildfires. Additionally, \r\nART solutions like CAT bonds and resilience bonds \r\nenable re/insurers and governments to transfer risks \r\nto capital markets and promote investment in resilient \r\ninfrastructure.122,123\r\n\t\r\n●Some insurers offer premium or deductible discounts \r\nto households that retrofit their homes to withstand \r\nextreme weather, such as roof reinforcement, \r\nimpact-resistant windows, or upgraded plumbing \r\nand electrical systems. In some regions, insurance \r\nregulators mandate such discounts for risk-reduction \r\nmeasures.124\r\n3.10 Government-backed insurance pools  \r\nGovernments sometimes intervene in re/insurance \r\nmarkets by creating government-backed re/insurance \r\npools, with the aim of stabilising insurance markets, \r\nparticularly where private re/insurers’ capacity may be \r\nstrained from events like extreme weather or terrorism. \r\nBased on a review of 14 government-backed re/insur-\r\nance pools (Appendix 3), this section outlines why such \r\ninterventions do not necessarily address the rising risks \r\nfrom growing exposure and vulnerability of properties \r\n\r\n38\r\nto extreme weather, leading to challenges for the private \r\ninsurance market, and why they could even exacerbate \r\nthe situation in some cases.125   \r\nMost pools are solidarity-based, ensuring insurance \r\navailability for those in need, with government subsidies \r\nencouraging homeowners to purchase insurance. Some \r\npools require mandatory coverage offers from insurers \r\nor mandatory insurance purchases from homeowners. \r\nPricing is often not based on actual risks. Most pools \r\nare permanent, except for the UK’s Flood Re, which \r\nis time-limited and aims to promote resilience and \r\nfoster expansion of private insurance by 2039, when \r\nits term comes to an end. Some pools incentivise \r\nrisk-reduction measures, like France’s Caisse Centrale \r\nde Réassurance, by offering deductible discounts for \r\ncommunities with risk prevention plans, though their \r\neffectiveness is unclear. \r\nWhile these pools may stabilise markets in the short \r\nterm, they do not address the root causes of rising \r\ninsurance losses or long-term challenges with the avail-\r\nability and affordability of market-based insurance in \r\nregions with rising risks.126 In addition, homeowners may \r\nbe underinsured, as pools typically cover the home’s \r\nactual cost rather than the replacement cost, and may \r\nunderestimate risks due to subsidised premiums, \r\nallowing continued living in high-risk areas without \r\nincentives to reduce property risks. \r\nGovernment-backed insurance pools \r\nmay stabilise markets in the short \r\nterm, but they do not address the root \r\ncauses of rising risks or long-term \r\nchallenges with insurance availability \r\nand affordability.\r\n125\t EIOPA and ECB 2024 proposes the establishment of an EU-level insurance pool combined with an EU fund for public disaster \r\nfinancing. In April 2024, Canada’s federal government announced a partnership with P&C insurers to develop a National Flood \r\nInsurance Program for high-risk households, set to launch in 2025 with support from the Canada Mortgage and Housing \r\nCorporation, Public Safety Canada, and Finance Canada. Insurance Bureau of Canada 2024. \r\n126\t Walker 2025b. Our findings were also recently confirmed in an interview with Paula Jarzabkowski.\r\n127\t US Department of Treasury; Federal Insurance Office 2025. Appendix B provides an overview of US FAIR plans in different \r\nstates and their coverage.\r\n128\t Joint Economic Committee Democrats 2024.\r\n129\t APCIA 2025.\r\n130\t Citizens Property Insurance Corporation 2024a, b.\r\n131\t Geneva Association 2022b. Author: Maryam Golnaraghi et al.\r\n132\t Brangham et al 2025.\r\nGovernment-backed insurance pools may face pressure \r\nto offer low-cost premiums, shifting costs to taxpayers \r\nand potentially sidelining private insurers. In some US \r\nstates, there is growing reliance on state-subsidised \r\ninsurance pools, known as FAIR plans.127 With private \r\ninsurers limiting or ceasing coverage in some regions, \r\nFAIR plans are increasingly acting as the ‘insurer of first \r\nresort’, though they are designed to be the ‘insurer of \r\nlast resort’. Policyholder subscriptions for FAIR plans hit \r\na record high in 2023, surpassing USD 1 trillion in cover-\r\nage.128 For example, California’s FAIR plan subscriptions \r\ngrew by 164% (2019–2024) and Florida’s Citizens \r\nProperty Insurance Corp by 193% (2017–2024).129 Rising \r\ndemand and increasing risks threaten their solvency. \r\nFor instance, in 2024, Florida’s Citizens transferred over \r\n428,000 policies to private insurers through its ‘depopu-\r\nlation’ programme.130  \r\n3.11 Insurance regulators\r\nInsurance companies are regulated to protect \r\nconsumers, ensure market stability, and maintain \r\nfairness. The debate over insurance availability and \r\naffordability has long been a priority for insurers and \r\nregulators. \r\nWith rising risks and insufficient risk-reduction meas-\r\nures, regulators must balance consumer protection and \r\nthe financial health of insurers.131 In some cases, efforts \r\nto lower insurance prices (or limit their increases) have \r\nundermined insurers’ ability to offer policies that reflect \r\nactual risks, which has led to some insurers limiting or \r\nceasing underwriting of new policies in high-risk areas. \r\nSome regulators are focusing on creating a desirable \r\nenvironment for market-based insurance availability by \r\nworking with governments and other stakeholders to \r\nintroduce resilience measures to reduce risks.132 \r\n\r\n39\r\n4\r\nReducing risks \r\nby investing in \r\nlocal resilience \r\n\r\n40\r\nNo country or region has comprehensively addressed \r\nrising extreme weather risks, leading to growing \r\ninsurance challenges. However, some initiatives show \r\npromise in scaling local resilience.133 Processes like \r\nproperty valuation, mortgage lending, and insurance \r\nprovision, particularly through government-backed \r\ninsurance pools, may need to be reconsidered to incen-\r\ntivise behavioural changes, such as avoiding high-risk \r\nareas and investing in property-level resilience. \r\nThis section presents a two-tier approach to address \r\nincreasing risks and improve local resilience. Tier 1 \r\nfocuses on scaling effective current approaches, while \r\ntier 2 calls for structural reforms in property valuation, \r\nmortgage, and insurance systems to drive behavioural \r\nchanges (Table 8). \r\n4.1 \r\nTier 1: Scale up targeted local resilience \r\n4.1.1\t Develop a shared understanding of hazards and \r\nlocal risks \r\nCollaboration between national or state governments \r\nand the insurance industry can help prioritise regions \r\nwhere public policy, legislative reforms, and regula-\r\ntory developments are needed to enforce resilience \r\nrequirements. These partnerships can also identify and \r\nprioritise large-scale resilience projects, aligning funding \r\nto support these efforts. Examples include:\r\n133\t European Commission 2025. In March 2025, in a joint communication to the European Parliament, the European Council, The \r\nCouncil, The European Economic And Social Committee, and The Committee of Regions, highlighted that the EU should be \r\nprepared with an ’integrated all-hazards approach’, a ’whole-of-government approach’, and a ’whole-of-society approach’ to \r\nenhance its capacities against all disasters, such as intensification of extreme weather and wars.\r\n134\t Australian Government 2024a.\r\n135\t Geneva Association 2020b. Details of the National Flood Insurance Programme and its launch date have not yet been publicly \r\nrevealed.  \r\n136\t In the US, some real estate platforms, in partnership with risk modelling firms, are offering property-level risk information. For \r\nexample, First Street provides data to Zillow and Realtor.com, while ClimateCheck partners with Redfin. See First Street 2024; \r\nZillow 2024; Realtor.com 2020; Redfin 2021.\r\n\t\r\n●Australian Hazards Insurance Partnership: Launched \r\nin 2023, this partnership between the Australian \r\nGovernment, Australian Climate Service, six \r\ninsurers, two reinsurers, and the Insurance Council \r\nof Australia addresses insurance affordability and \r\nprioritises flood mitigation.134 \r\n\t\r\n●Canadian National Working Group on Financial \r\nRisk: Co-chaired by Public Safety Canada and the \r\nInsurance Bureau of Canada, this group identified \r\nhigh-flood-risk properties and proposed financial \r\nsolutions, leading to expanded flood insurance and a \r\nNational Flood Insurance Programme with resilience \r\nmeasures for high-risk areas.135 \r\nSuch initiatives could also drive the expansion of \r\nmandatory hazard disclosure laws across all jurisdic-\r\ntions, helping homeowners make informed decisions \r\nwhen building or buying in high-risk areas. Additionally, \r\nreal estate databases providing hazard information are \r\nincreasingly influencing homeowners’ decisions.136\r\nReducing risks by investing \r\nin local resilience \r\nA two-tier approach focused on scaling effective \r\napproaches and reforming property valuation, \r\nmortgage, and insurance systems\r\n\r\n41\r\nTABLE 8: A TWO-TIER APPROACH TO SCALING UP RESILIENCE AT THE LOCAL AND PROPERTY LEVELS\r\nGOAL\r\nSTAKEHOLDER\r\nACTION\r\nTier 1\r\nTargeted, \r\nscaled local \r\nresilience \r\nmeasures that \r\nare proven to be \r\neffective\r\n•\tGovernments \r\n•\tPrivate re/insurers\r\n•\tPublic utilities and \r\ninfrastructure owners\r\n•\tHomeowners\r\n•\tNeighborhoods and \r\ncommunities\r\n1.\t Develop a shared understanding of hazards and \r\nlocal risks\r\n2.\t Develop solutions for preventing risks in new \r\nconstruction\r\n3.\t Focus on the most impactful measures to retrofit \r\nexisting structures\r\n4.\t Redesign post-disaster aid to incentivise ex-ante \r\nresilience measures \r\nEnhanced \r\nknow-how \r\namong key \r\nstakeholders \r\nand adoption \r\nof latest \r\ninnovations\r\n•\tInsurance-funded think tanks\r\n•\tUniversities and technical \r\ncolleges offer certification \r\ntraining for:\r\n\t\r\n‒ Home inspectors\r\n\t\r\n‒ Property appraisers\r\n\t\r\n‒ Mortgage lenders\r\n\t\r\n‒ Insurance brokers\r\n\t\r\n‒ Technologists and innovators\r\n•\tInvestors in innovation and \r\ntechnology such as govern-\r\nments, philanthropists and \r\nventure capitalists\r\n5.\t Increase the use of resilience guidelines to enable \r\ninformed decisions\r\n6.\t Develop and deploy innovative solutions for scaled \r\nadoption\r\nTier 2\r\nChanges \r\nto property \r\nvaluation and \r\nmortgage \r\nsystems, linked \r\nwith insurance, \r\nto impact \r\nhomeowner \r\ndecisions\r\n•\tCertified property valuers\r\n•\tMortgage lenders\r\n•\tPrivate re/insurers\r\n•\tGovernment-backed insurance \r\npools \r\n•\tGovernment-sponsored \r\nenterprises\r\n•\tReal estate community\r\n•\tInsurance and mortgage \r\nregulators\r\n•\tCredit rating agencies\r\n1.\t Use risk-based premiums, factor the rising costs \r\nof home ownership into mortgage appraisal, and \r\nmonitor borrowers’ insurance annually.\r\n2.\t Strengthen government-insurance industry collab-\r\noration to support the implementation of home \r\nresilience certification programmes\r\n3.\t Enhance insurance industry partnerships to raise \r\nawareness and strengthen resilience\r\n4.\t Improve government-backed re/insurance pools to \r\npromote and support resilience measures\r\n5.\t Boost support from insurance and lending regula-\r\ntors for resilience measures \r\n6.\t Include resilience measures in credit ratings\r\nSource: Geneva Association\r\n137\t Government of Canada 2024.\r\n138\t Australian Government 2024b; Insurance Council of Australia 2023.\r\n4.1.2\t Develop solutions for preventing risks in new \r\nconstruction\r\nMitigating risks in new construction versus existing \r\nbuildings requires distinct approaches. To reduce risks \r\nin new buildings, governments must regularly update \r\nand enforce building codes that promote resilience, \r\nparticularly for hazard-prone regions. Risk-based land \r\nzoning can prevent construction in high-risk areas \r\ndeemed unsuitable for residents while ensuring new \r\nproperties comply with updated codes in other regions. \r\nPolicies for voluntary relocation or buybacks in disas-\r\nter-prone regions, particularly for vulnerable commu-\r\nnities, may also be needed, though politically sensitive. \r\nFurthermore, risk awareness and mandatory hazard \r\ndisclosure laws are encouraging homeowners to avoid \r\nhigh-risk areas. \r\nRegular building-code updates \r\n\t\r\n●Several countries are enhancing resilience through \r\nupdated building codes. Japan updates its codes \r\nregularly, with new fire resilience measures added \r\nin 2023. Canada’s 2026 updates will integrate \r\nclimate change resilience into its National Building \r\nCode.137 Australia’s 2025 Building Codes will focus on \r\nresilience, potentially saving AUD 4 billion annually.138 \r\nThe EU’s 2025–2026 Eurocodes will address climate \r\nimpacts on structural design, though local updates \r\n\r\n42\r\nwill also be needed.139 In the US, the Insurance \r\nInstitute for Business and Home Safety (IBHS) has \r\ndeveloped science-based standards for hurricane- \r\nand wildfire-resistant buildings. \r\n\t\r\n●A successful example is the rebuilding of Paradise, \r\nCalifornia, after the 2018 Camp Fire, which destroyed \r\n19,000 structures and caused USD 20.6 billion in \r\nlosses.140 After insurers stopped issuing policies, the \r\nlocal government enforced stricter building codes \r\nand zoning, requiring homes to meet IBHS Wildfire \r\nPrepared Home standards.141 By January 2025, 2,629 \r\nhomes and 581 multi-family units were rebuilt and \r\nMercury Insurance returned, offering coverage at \r\nlower premiums than the state’s FAIR plan.142,143\r\nRisk-based land zoning\r\n\t\r\n●Restricting new buildings or using more stringent \r\nbuilding codes in disaster risk zones: The 2020 \r\namendments to Japan’s Building Standards Act \r\nallow local governments to designate disaster risk \r\nzones where residential construction is prohibited or \r\nsubject to stricter building codes.144 This is in addition \r\nto mandatory flood risk disclosures from realtors, \r\nbased on flood hazard maps provided by the Ministry \r\nof Land, Infrastructure, Transport, and Tourism.145\r\n\t\r\n●Policies for voluntary relocation and buybacks \r\nof unsuitable properties for residential use: In \r\nAustralia, the Queensland Voluntary Home Buy-\r\nBack Programme and Resilient Homes Fund were \r\nlaunched after the 2021–2022 Southern Queensland \r\nfloods, which damaged 7,000 homes. This was \r\na collaborative effort between the Australian and \r\nQueensland Governments, implemented under the \r\nDisaster Recovery Funding Arrangements, which \r\nraised AUD 741 million to support the programme. \r\nThe buyback programme, which is managed by the \r\nQueensland Reconstruction Authority in partnership \r\nwith local authorities, identifies at-risk homeowners \r\nand offers a buyback of their properties based on \r\npre-flood and current market values. Bought homes \r\nare either demolished or relocated, with land then \r\nrezoned for non-residential use. By May 2024, 628 \r\nhomes had been settled. Projections suggest that 4% \r\nof Australian properties may be deemed unsuitable \r\nfor residential use by 2030.146\r\n139\t European Commission 2024b,c.\r\n140\t Beam 2023.\r\n141\t FEMA 2022.\r\n142\t California Department of Finance 2024.\r\n143\t Financial Times 2025.\r\n144\t  Ministry of Land, Infrastructure, Transport and Tourism of Japan b,c; Kesennuma City 2024. As of April 2024, local govern-\r\nments have designated a total of 22,502 disaster risk zones. For example, following the 2011 earthquake and tsunami, \r\nKesennuma City prohibited residential buildings, child welfare facilities, and other buildings along its coastline.\r\n145\t  Ministry of Land, Infrastructure, Transport and Tourism of Japan 2020.\r\n146\t Queensland Government 2024.\r\n147\t Canterbury Earthquake Recovery Authority 2016.\r\n148\t ten Brink 2024.\r\n149\t Geneva Association 2020g; OECD 2024a.\r\n150\t Bateman 2024.\r\nA similar initiative in New Zealand followed the \r\n2010–2011 Christchurch earthquakes, where 7,400 \r\nproperties were zoned for buyouts. Buyouts were \r\ninitially based on 2007–2008 property valuations, \r\nwith lower offers for underinsured properties. In \r\n2012, buyouts were extended to vacant, commercial, \r\nand uninsured properties at 50% of land value, later \r\nrevised to 100% after legal challenges.147\r\n4.1.3\t Focus on the most impactful retrofitting \r\nmeasures \r\nRetrofitting existing buildings may exceed local capa-\r\nbilities and resources. Reducing exposure and vulner-\r\nabilities in identified regions requires targeted actions \r\nby governments, infrastructure owners, utilities, and \r\nhazard-management agencies. \r\n\t\r\n●Governments can pass legislation to scale up local \r\nresilience while investing in high-impact projects and \r\nretrofitting critical infrastructure. Notable examples \r\ninclude: \r\n\t\r\n‒ The ‘Room for the River’ programme (2000–2015) \r\nin the Netherlands involved converting reclaimed \r\nland in Noordwaard into floodplains, reducing \r\nflood risks for 60,000 people.148\r\n\t\r\n‒ Germany has invested in flood-risk management \r\nand integrated nature-based systems with critical \r\ninfrastructure. Its National Flood Protection \r\nProgramme committed EUR 5.4 billion over 20 \r\nyears, including projects like relocating dykes and \r\nrestoring 600 hectares of floodplain in Lödderitzer \r\nForest to reduce flood levels.149\r\n\t\r\n‒ The Japanese government, alongside the city of \r\nTokyo, developed the world’s largest underground \r\nfloodwater diversion system – the Metropolitan \r\nOuter Area Underground Discharge Channel – \r\nat a cost of JPY 230 billion. Since 2006, it has \r\nprevented JPY 150 billion in flood damage. In \r\n2023, a JPY 37.3 billion project was launched to \r\nstrengthen levees and improve drainage.150\r\n\r\n43\r\n\t\r\n●National or state/local home fortification \r\nprogrammes, supported by legislation, funding, and \r\nincentives, have a demonstrated track record of \r\nenhancing property-level resilience. \r\n\t\r\n‒ The Strengthen Alabama Homes programme, \r\nlaunched in 2011, is a collaboration between local \r\ngovernments, insurers, and IBHS’s FORTIFIED \r\nstandards (see Box 6 for highlights).151 The \r\nprogramme proved effective, with over 95% of \r\n151\t Alabama ranks fourth for major hurricanes in the US (after Florida, Texas, and Louisiana), with the most at-risk areas along \r\nthe coastline. Notable recent hurricanes: Ivan (2004), Katrina (2005), Michael (2018), Sally & Zeta (2020). FORTIFIED is a \r\nconstruction and retrofit standard designed to strengthen homes against severe weather, especially strong winds, cyclones, \r\nand hurricanes. Smart Home America 2024a, b; The Alabama Center for Insurance Information and Research 2021; National \r\nCouncil of Insurance Legislators 2024.\r\n152\t Campo-Flores and Haller 2023. \r\n153\t Louisiana Legislative Auditor 2025. \r\n154\t Smart Home America 2024a; Smart Home America 2024b; The Alabama Center for Insurance Information and Research \r\n2021; Louisiana Legislative Auditor 2025.\r\n155\t OECD 2024a.\r\nFORTIFIED homes in coastal Alabama sustaining \r\nlittle to no damage during Hurricane Sally (2020). \r\nThe programme also helps maintain affordable \r\ninsurance despite high hurricane risks.152 This \r\nmodel has been expanded to other states such \r\nas Louisiana and Mississippi.153 In Louisiana, \r\nfunding for the programme is currently allocated \r\nfrom the state government budget through \r\nlegislature each year. \r\nBox 6: Strengthen Alabama Homes (SAH) programme\r\nReason for launch\r\n•\tAlabama ranks 4th for major hurricanes among US states\r\nObjectives, actions, and funding\r\n•\t Legislative developments: 2011 SAH Act passed to lower insurance rates and improve home resilience\r\n•\t Application: First come, first served; quarterly application period\r\n•\t Compliance: IBHS FORTIFIED standard certification \r\n•\t Grants: Max USD 10,000 for single-family homes (USD 106 million since 2016)\r\n•\t Funding: Through increased insurer licensing fees\r\nCertification process\r\n•\t Initial assessment: By FORTIFIED-certified evaluator, providing steps for compliance\r\n•\t Bidding: Homeowners select three state-certified contractors, grant paid to chosen one\r\n•\t Certification: A FORTIFIED-certified evaluator confirms compliance\r\nOutcomes and benefits\r\n•\t Number of homes FORTIFIED: 50,000 as of September 2024 (17% from SAH)\r\n•\t Protection: 95% FORTIFIED homes had little to no damage after Hurricane Sally in 2020\r\n•\t Valuation: 7% increase in property value\r\n•\t Insurance premiums: 35–45% reduction in property insurance premiums for coverage of the wind component \r\nof hurricanes\r\nSource: Smart Home America, The Alabama Center for Insurance Information and Research, and Louisiana Legislative Auditor.154 \r\nOther initiatives could also incentivise behavioural \r\nchange to reduce exposure and vulnerabilities: \r\n\t\r\n●Mandatory disclosure laws. Governments should \r\nimplement mandatory disclosure laws to provide \r\nhomeowners with critical risk information.\r\n\t\r\n●Co-investment in nature-based systems. National, \r\nstate, and local governments could collaborate to \r\nco-invest in nature-based solutions, enhancing the \r\nresilience and lifespan of public infrastructure. For \r\nexample, in California’s Sacramento Valley, restoring \r\n60,000 hectares of floodplains through the Sutter \r\nand Yolo bypasses diverted 80% of floodwaters, \r\neasing pressure on levees and improving flood \r\nprotection for Sacramento.155\r\n\t\r\n●Digital tools for homeowners. Specialised, non-profit \r\norganisations, funded by national governments and \r\nthe insurance industry, are developing digital tools to \r\nhelp homeowners assess and improve resilience to \r\nextreme weather. \r\n\r\n44\r\n\t\r\n‒ In Australia, the Resilient Building Council, with \r\nfederal funding, launched the free Bushfire \r\nResilience Rating Home Self-Assessment app in \r\n2023, which provides tailored bushfire resilience \r\nrecommendations. Over 6,600 households had \r\ninvested AUD 44 million in upgrades by March \r\n2024, receiving lower mortgage rates and \r\ninsurance discounts for their efforts.156\r\n\t\r\n‒ In the US, the Federal Alliance for Safe Homes \r\ndeveloped the Inspect to Protect online tool, which \r\nassesses home compliance with building codes and \r\nresilience, and offers improvement suggestions.157 \r\n\t\r\n‒ Liberty Mutual’s WeatherReady app, developed \r\nwith the IBHS in 2022, provides home resilience \r\nassessments and recommendations to reduce \r\nextreme weather risks. Over 50,000 households \r\nhave used the app, with 20% implementing \r\nimprovements.158\r\n4.1.4\t Redesign post-disaster aid to incentivise ex-ante \r\nresilience measures \r\nAs disaster costs rise, many governments are shifting \r\nfocus from post-disaster aid to proactive resilience \r\nmeasures. Some are amending legislation and investing \r\nin large-scale infrastructure projects while transferring \r\nthe financial burden of local damages to local authorities \r\nand homeowners, encouraging reliance on market-\r\nbased insurance. Others are reforming post-disaster aid \r\nprogrammes to increase response efficiency and direct \r\nfunds toward ex-ante, local-level resilience projects. \r\n156\t Australian Government 2024c,d.\r\n157\t See: https://inspecttoprotect.org/ \r\n158\t See: https://libertyplus.libertymutual.com/weather-ready \r\n159\t Geneva Association 2020c.\r\n160\t Public Safety Canada 2022; Public Safety Canada 2025.\r\n161\t Course offerings for mortgage professionals: https://mortgageproscan.ca/courses/more/catalogue/course-name?item-\r\nId=aa3e9c20-dcf6-ea11-b81d-00155d23e103&type=course; home inspectors: https://icca.uwaterloo.ca/training/ \r\nregister/home_inspection; and insurance brokers: https://icca.uwaterloo.ca/training/register/insurance  \r\n162\t IBHS 2020b; IBHS 2022; IBHS 2024; ICCA 2024a,b,c.\r\nFollowing the 2009 update to the Federal Water Act, \r\nindividuals at risk of flooding in Germany must take \r\nprecautionary measures, with the federal government \r\nfocusing on high-impact resilience projects rather than \r\ncompensating for damages. Local governments and \r\nhomeowners are expected to cover damages through \r\ninsurance or reserves.159 In Canada, the Disaster Financial \r\nAssistance Arrangements programme has been modern-\r\nised based on recommendations from the 2022 Expert \r\nAdvisory Panel. As of April 2025, the updated programme \r\naims to streamline disaster support and allocate funding \r\nfor resilience projects in high-risk regions.160\r\n4.1.5\t Increase the use of resilience guidelines to \r\nenable informed decisions \r\nRe/insurers invest heavily in research and development \r\nto develop resilience measures and translate them into \r\nactionable guidelines for homeowners, businesses, \r\nlocal governments, and communities, using innovative \r\nchannels to reach target audiences. For example, \r\ninsurance-supported, science-based organisations like \r\nthe IBHS and the Intact Center on Climate Adaptation \r\n(ICCA) create practical guidelines and tools, which are \r\ndisseminated through traditional and social media, and \r\npartnerships with local governments and banks (Table \r\n9). In Canada, the ICCA, in collaboration with technical \r\ncolleges, has developed certified training for real estate \r\nbrokers, insurance brokers, home inspectors, and \r\nmortgage appraisers to help them inform homeowners \r\nabout property risks.161 \r\nTABLE 9: PROGRAMMES AND GUIDELINES PROVIDED BY INSURANCE-INDUSTRY-FUNDED CENTRES OF \r\nEXCELLENCE\r\nInsurance Institute for Business and Home Safety\r\nIntact Center on Climate Adaptation\r\nFORTIFIED building standard \r\nA building certification standard to strengthen homes \r\nagainst extreme wind and hail.\r\nClimate-ready infographics \r\nProvide easy and cost-effective steps to protect homes \r\nand communities from extreme heat, flooding, and \r\nwildfires.\r\nWildfire Prepared \r\nA building certification standard to improve resilience for \r\nwildfires. \r\nHome Flood Protection Check-Up \r\nAn online self-assessment tool on actions to qualify for \r\nmunicipal subsidies and insurance discounts.\r\nHome Disaster Ready Guides\r\nGuides to help property owners protect homes and \r\nbusinesses before, during, and following hurricanes, \r\nthunderstorms, winter weather, and wildfires.\r\nMunicipal Flood Risk Check-Up \r\nSelf-assessment questionnaire and actions to reduce \r\nflood risks.\r\nSource: IBHS and ICCA162\r\n\r\n45\r\n4.1.6\t Develop and deploy innovative solutions for \r\nscaled adoption \r\nOver the past decade, innovations to address physical \r\nclimate risks have surged, including risk monitoring \r\nand assessment, proactive maintenance, risk reduction \r\nand prevention, changes to insurance and mortgage \r\nanalytics, and risk-based insurance pricing. This has \r\n163\t See: https://riskthinking.ai/ \r\n164\t See: https://www.deltaterracapital.com/ \r\n165\t See: https://www.fireswarmsolutions.com/ \r\n166\t See: https://www.vibrantplanet.net/ \r\n167\t Access Newswire 2024; Saines 2023; Kasteloo 2024.\r\n168\t See: https://www.strataus.com/ \r\n169\t Gongloff 2024; Castenson 2023.\r\nbeen driven by philanthropic, public-, and private-sector \r\nfunding, an entrepreneurial mindset, and the push for a \r\nsafer, more resilient society. However, market demand \r\nand adoption at the local level are crucial for deploying \r\nthese solutions. Examples of how demonstrated technol-\r\nogies have changed the way society manages extreme \r\nweather risk in recent years are provided in Box 7. \r\nBox 7: Innovative technologies to enhance extreme weather risk management\r\nForward-looking climate risk modelling: Riskthinking.AI combines climate science, big data, and AI to model \r\nclimate risks with a forward-looking, stochastic approach, covering over 80,000 companies’ assets.163 Their \r\nplatform captures extreme events and provides insights beyond deterministic models, helping market analysts, \r\nstock exchanges, investors, and regulators make informed decisions.\r\nHousing and mortgage valuation with climate risk and insurance pricing: DeltaTerra Capital assesses prop-\r\nerty valuations and mortgage default risk related to physical climate risk and insurance, providing actionable \r\ninsights for institutional investors, lenders, and policymakers.164 \r\nEarly wildfire suppression: FireSwarm Solutions uses AI-powered coordination software and ultra-heavy-lift \r\ndrones for rapid wildfire suppression, detecting and stopping fires before they escalate.165 They collaborate with \r\ngovernments and utilities in wildfire-prone regions.\r\nFire-risk management coordination among governments and utilities: Vibrant Planet’s AI-driven platform \r\nhelps fire districts, counties, and utilities prioritise and coordinate wildfire risk management plans across 70 \r\nmillion acres in the Western US, providing real-time planning with quantified risk reduction.166 \r\nProactive infrastructure maintenance: Startups like Airobotics, Percepto, and Firmatek use drones, sensors, \r\nand data analytics to monitor and assess weather-related risks to critical infrastructure in Germany, Canada and \r\nthe US, enabling proactive maintenance, reducing downtime, and enhancing safety.167 \r\nResilient home construction: The SABS™ building system uses innovative materials and construction \r\napproaches to create energy-efficient, hurricane- (winds up to 260 mph/420 kmh), flood-, and fire-resistant \r\nhomes.168 Approved by the International Code Council, the SABS technology reduces construction costs by \r\n15–30% and has withstood extreme conditions in Florida and Hawaii. A training centre is opening in California \r\nfollowing increased demand after the 2025 Los Angeles fires.\r\nSource: Gongloff and Castenson169\r\n4.2 Tier 2: Implement structural changes to \r\nvaluation and mortgage systems to impact \r\nhomeowner decisions \r\n4.2.1\t Use risk-based premiums, factor rising cost of \r\nhome ownership into mortgage appraisal, and \r\nmonitor borrowers’ insurance annually.\r\nCertified property valuers or appraisers could include \r\nan assessment of the insured value of a property (i.e. \r\nthe cost of rebuilding after a disaster), building codes \r\nused, and any retrofits that have been undertaken to \r\nstrengthen the property’s resilience in property valuation \r\nreports. Mandatory hazard disclosure laws would allow \r\nfor the inclusion of this information.\r\n\r\n46\r\nValuation and mortgage systems \r\nshould factor in actual property risks, \r\nreflected in risk-based pricing and \r\nborrowers’ abilities to pay premiums, \r\nbefore mortgage approval.\r\nThis may require property valuers to obtain additional \r\ntraining to be able to assess extreme-weather-re-\r\nlated risks as well as the insured value of a property. \r\nLenders could:170\r\n\t\r\n●Integrate actual property risks, as reflected in \r\nrisk-based insurance pricing, to set insurance \r\nrequirements and evaluate borrowers’ premium-\r\npaying abilities before mortgage approval.\r\n\t\r\n●Inform underwriting and rate decisions using \r\nforward-looking mortgage stress tests that consider \r\nincreasing insurance costs and possible property \r\nvalue declines over the term of the mortgage.\r\n\t\r\n●Verify property insurance availability annually \r\nand monitor mortgage delinquencies related to \r\nborrowers’ lack of insurance and utilise this data to \r\ndevelop preventive measures.\r\n\t\r\n●Raise borrower awareness of key hazards and \r\nprovide requirements for insurance-coverage levels \r\naligned with actual risks and the cost of owning the \r\nproperty before coverage approval.\r\n\t\r\n●Offer loans to qualified borrowers for property \r\nretrofits, such as roof reinforcement and wildfire \r\ndefences. This incentivises the promotion of local \r\nresilience through revenue creation. \r\nGovernment-sponsored enterprises and investors in \r\nsecondary markets could require lenders to assess the \r\nadequacy of borrowers’ property insurance annually \r\nand develop better methods to evaluate the impact of \r\nextreme weather on affordability and property value \r\nprior to the origination of new loans.\r\nMortgage regulators could work with lenders to create \r\nassessment methods for extreme weather risks, \r\npreventing these risks from entering secondary markets. \r\nMandatory monitoring of borrowers’ insurance by \r\nlenders could be enforced by regulators.\r\n170\t Actuaries Institute 2024 and discussions during Geneva Association technical roundtables.\r\n171\t Geneva Association 2022a.\r\n4.2.2\tStrengthen government-insurance industry \r\ncollaboration to support the implementation of \r\nhome resilience certification programmes\r\nThis could be enabled by offering incentives to home-\r\nowners to retrofit homes, which could lead to lower \r\nmortgage rates for certified homes, impacts on home \r\nvaluation, and insurance premiums. For example:\r\n\t\r\n●In the US, the Strengthen Alabama Homes \r\ncertification involves an IBHS FORTIFIED evaluator, \r\nwith certification granted once standards are met and \r\nverified.\r\n\t\r\n●In Australia, the Bushfire Resilience Rating Home \r\nSelf-Assessment app requires homeowners to obtain \r\ncertification from Fire Safety Engineers to qualify for \r\ninsurance and mortgage reductions.\r\n4.2.3\tEnhance insurance industry partnerships to raise \r\nawareness and strengthen resilience \r\nRe/insurers could:\r\n\t\r\n●Engage with governments to build a shared \r\nunderstanding of hazards, identify regions with \r\ninsurance affordability issues, and recommend high-\r\nimpact resilience projects.\r\n\t\r\n●Invest in R&D for next-generation risk models, \r\noffering forward-looking, stochastic analysis to \r\nidentify regions facing rising insurance challenges.\r\n\t\r\n●Continually innovate products to better meet \r\npolicyholders’ needs and enhance resilience \r\n(e.g. preserving nature-based systems through \r\ninvestments and novel insurance products).171\r\n\t\r\n●Develop digital services, such as apps, to help \r\nhomeowners assess and reduce property risks.\r\n\t\r\n●Partner with academic institutions to expand certified \r\ntraining for professionals to guide homeowners in \r\nreducing risks through retrofits.\r\n\r\n47\r\n4.2.4\tImprove government-backed re/insurance pools \r\nto promote and support resilience measures  \r\nGovernment-backed insurance pools could:\r\n\t\r\n●Use risk-based pricing\r\n\t\r\n●Only serve as insurers of last resort \r\n\t\r\n●Prevent further development in high-risk zones \r\nby withholding insurance from new homeowners \r\nunable to secure private market coverage due to high \r\nproperty risks\r\n\t\r\n●Set clear resilience goals with timelines, encouraging \r\ngovernments and homeowners to invest in local- and \r\nproperty-level resilience\r\n\t\r\n●Incentivise property resilience through deductible \r\nand premium discounts or provide extra funds for \r\nstrengthening properties.\r\nGovernment-backed re/insurance pools \r\nshould be risk based and promote \r\nresilience measures. \r\n4.2.5\tIncrease support from insurance and lending \r\nregulators for resilience measures  \r\nFinancial service regulators could actively promote and \r\nsupport resilience measures by:\r\n\t\r\n●Allowing risk-based pricing to signal risk levels to \r\nstakeholders, including homeowners, governments, \r\nand mortgage lenders.\r\n\t\r\n●Encouraging local governments to adopt risk-based \r\nland zoning and updated building codes, advocating \r\nfor government investments in local- and property-\r\nlevel resilience and collaborating with government \r\nagencies on resilience initiatives.\r\n\t\r\n●Educating the public on the private insurance model \r\nand the importance of risk-based pricing to build \r\ntrust.\r\n\t\r\n●Advocating for the reform of government-backed \r\ninsurance pools so they are risk based and include \r\nresilience requirements.\r\n4.2.6\tInclude resilience measures in credit ratings\r\nCredit rating agencies could update their processes to \r\nincorporate extreme weather risks and related resilience \r\nstrategies, for example for governments and lenders via \r\nrated mortgage credit securities.\r\n\r\n48\r\nChallenges \r\nahead\r\n5\r\n\r\n49\r\nThis report seeks to identify how risks associated \r\nwith extreme weather in the housing sector stem \r\nfrom socioeconomic decisions made by a range of \r\ndifferent stakeholders. It emphasises the urgent need \r\nfor a paradigm shift towards a collective, all-of-society \r\napproach to minimise exposure and strengthen local \r\nresilience to extreme weather risks. Fostering inter- and \r\ncross-sectoral collaboration is crucial to developing \r\nand scaling up innovative solutions and aligning goals, \r\npriorities, and resources to increase investments in \r\nlocal resilience and develop preventive measures to \r\nreduce risks. \r\nInvesting in decarbonisation yields long-term financial \r\nreturns by tackling the root causes of climate change, \r\nincluding weather-related hazards and shifting climatic \r\nconditions. But there is also a critical need to increase \r\ninvestments in adaptation and local resilience to address \r\nshort-term challenges for vulnerable communities and \r\nlimit exposure and vulnerability over the long term.\r\nChallenges ahead\r\nThere is a critical need to increase\r\ninvestments in adaptation and local \r\nresilience to benefit communities over \r\nthe short and long term.\r\n\r\n50\r\nAppendix 1: Projected increase in the frequency and severity of \r\nfloods and wildfires \r\n172\t IPCC 2021.\r\n173\t Ibid.\r\nREGIONS WITH PROJECTED CHANGES IN THE FREQUENCY AND SEVERITY OF A) RIVER FLOODS AND B) \r\nHEAVY PRECIPITATION AND PLUVIAL FLOODS UNDER A 2°C SCENARIO \r\nSource: IPCC172\r\nREGIONS WITH PROJECTED CHANGES IN THE FREQUENCY AND SEVERITY OF WILDFIRES UNDER A 2°C \r\nSCENARIO\r\nSource: IPCC173\r\nAppendices\r\nA) River floods\r\nB) Heavy precipitation & pluvial floods\r\nHigh \r\nconfidence \r\nof increase\r\nMedium \r\nconfidence of \r\nincrease\r\nLow \r\nconfidence of \r\ndirection change\r\nMedium \r\nconfidence \r\nof decrease\r\nHigh \r\nconfidence \r\nof decrease\r\nNot \r\nrelevant\r\nHigh \r\nconfidence \r\nof increase\r\nMedium \r\nconfidence of \r\nincrease\r\nLow \r\nconfidence of \r\ndirection change\r\nMedium \r\nconfidence \r\nof decrease\r\nHigh \r\nconfidence \r\nof decrease\r\nNot \r\nrelevant\r\n\r\n51\r\nAppendix 2: Litigation cases brought against local governments \r\nand agencies\r\n174\t  Sabin Center Climate Change Litigation Database 1999, 2005, 2009, 2016; Superior Court for The State of California 2024; \r\nOntario Superior Court of Justice 2024; Almasy and Holcombe 2019. \r\nYear\r\nJurisdiction\r\nDefendant\r\nLitigant \r\nBasis for litigation\r\nResults to date\r\nUS\r\n1999\r\nTexas\r\nHarris County and Harris \r\nCounty Flood Control \r\nDistrict\r\n400 \r\nhomeowners\r\nExacerbated flood \r\ndamages from upstream, \r\nwithout risk reduction and \r\nprevention measures \r\nMunicipal govern-\r\nments were found \r\nnot liable to avoid \r\nsetting a precedent \r\nfor holding govern-\r\nments liable for \r\nhurricanes allegedly \r\ncaused by global \r\nwarming\r\n2005\r\nNew Orleans\r\nUnited States Army Corps \r\nof Engineers, United \r\nStates of America\r\nSeveral \r\nindividuals\r\nDredging method exacer-\r\nbated Hurricane Katrina’s \r\neffects\r\nClaims were \r\ndismissed \r\n2014\r\nChicago\r\nAround 200 Chicago-area \r\nlocal governments \r\nFarmers \r\nInsurance\r\nInadequately prepared \r\nsewers and storm water \r\ndrains for 2013 floods\r\nLawsuits were with-\r\ndrawn shortly after \r\nthey were filed\r\n2015\r\nIllinois\r\nBerger Excavating \r\nContractors, Inc., \r\nMetropolitan Water \r\nReclamation District, \r\nMaine Township, and Park \r\nRidge\r\nClass action \r\nled by an \r\nindividual\r\nThe stormwater system \r\ncaused flooding in \r\n2008, due to inadequate \r\npreparedness\r\nClaims were \r\ndismissed \r\n2019\r\nCalifornia\r\nPacific Gas & Electric Co. \r\nVictims of \r\nfour major \r\nwildfires in \r\nCalifornia, \r\n2015–2018\r\nFailure to prevent the \r\nonset of wildfires due \r\nto mismanagement of \r\nelectrical equipment\r\nSettled with payment \r\nof USD 13.5 billion, \r\nresulting in a bank-\r\nruptcy filing\r\n2024\r\nCalifornia\r\nCalifornia FAIR \r\nPlan Association, \r\nthe Department of \r\nInsurance, and Insurance \r\nCommissioner \r\nClass action \r\nled by an \r\nindividual\r\nSelling policies that \r\nfail to properly cover \r\nfire damage and \r\nnot enforcing laws \r\nappropriately\r\nOngoing\r\nCanada\r\n2016\r\nOntario\r\nOntario Ministry of Natural \r\nResources \r\nClass action \r\nled by an \r\nindividual\r\nFailure to adapt to \r\nchanging climatic circum-\r\nstances by managing \r\nwater levels in several \r\nlakes, leading to property \r\ndamage\r\nPlaintiffs discon-\r\ntinued their case in \r\n2018\r\n2020\r\nOntario\r\nTown of Oakville, Halton \r\nRegion Conservation \r\nAuthority, The Regional \r\nMunicipality of Halton, \r\nThe Corporation of the \r\nTown of Milton, His \r\nMajesty the King in right \r\nof Ontario, and Mayor \r\nRobert Burton\r\nClass action \r\nled by an \r\nindividual\r\nDevelopment decisions \r\nstarting in 1986 expanded \r\nthe floodplain and \r\nincreased flood risks\r\nSettled with payment \r\nof USD 500,000 for \r\nflood-risk reduction \r\ninformation \r\nand education \r\ndevelopment \r\n \r\nSource: Sabin Center Climate Change Litigation Database, Superior Court for The State of California, Ontario Superior Court of Justice, and Almasy \r\nand Holcombe174\r\n\r\n52\r\nAppendix 3: Government-owned or -subsidised insurance schemes\r\nJurisdiction/\r\nscheme\r\nScope\r\nStructure\r\nPeril\r\nType of \r\nproperty \r\ncovered\r\nMandatory \r\nelement \r\n(offer or \r\nuptake)\r\nType of \r\nscheme\r\nDuration\r\nRole in the \r\nmarket\r\nAustralia \r\nAustralian \r\nReinsurance Pool \r\nCorporation\r\nCyclones\r\nBroader (e.g. \r\ncommercial \r\nproperties)\r\nNo mandatory \r\nelement\r\nPublic-private\r\nPermanent\r\nResidual \r\nprovider\r\nBelgium \r\nBelgian Natural \r\nCatastrophe Pool \r\nMulti-peril\r\nBroader (e.g. \r\ncommercial \r\nproperties)\r\nMandatory \r\noffer\r\nPrivate\r\nPermanent\r\nResidual \r\nprovider\r\nDenmark \r\nDanish Storm \r\nStorm surge\r\nResidential \r\nonly\r\nMandatory \r\noffer \r\nPublic-private\r\nPermanent\r\nSole provider\r\nFrance \r\nCaisse Centrale \r\nde Réassurance  \r\nMulti-peril\r\nBroader (e.g. \r\ncommercial \r\nproperties\r\nMandatory \r\noffer\r\nPublic-private\r\nPermanent\r\nResidual \r\nprovider\r\nIceland \r\nNatural \r\nCatastrophe \r\nInsurance of \r\nIceland \r\nMulti-peril\r\nBroader (e.g. \r\ncommercial \r\nproperties\r\nMandatory \r\noffer \r\n Public-private Permanent\r\nSole provider\r\nJapan \r\nJapan \r\nEarthquake \r\nReinsurance \r\nEarthquake\r\nResidential \r\nonly\r\nNo mandatory \r\nrequirement\r\nPublic-private\r\nPermanent\r\nSole provider\r\nNew Zealand \r\nNatural Hazards \r\nCommission \r\nToka Tū Ake \r\nMulti-peril\r\nResidential \r\nonly\r\nMandatory \r\noffer\r\nPublic-private\r\nPermanent\r\nResidual \r\nprovider\r\n\r\n53\r\nPremiums & payouts\r\nFinancing & risk transfer\r\nResilience requirements\r\nPremiums\r\nPayouts\r\nPublic \r\nfinancing\r\nRisk transfer \r\nto private \r\nreinsurance \r\nmarkets\r\nInsurance \r\npolicies\r\nPublic \r\nmeasures\r\nPublic/private \r\nmeasures\r\nRisk based\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nNo\r\nPremium \r\ndiscounts for \r\nundertaking \r\nrisk reduction/\r\nprevention \r\nmeasures\r\n-\r\nClimate risk \r\nmodelling/data\r\nPremiums \r\nlimited by law\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nNo\r\n-\r\n-\r\n-\r\nRisk based\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nNo\r\nPremium \r\ndiscounts for \r\nundertaking \r\nrisk reduction/\r\nprevention \r\nmeasures\r\n-\r\n-\r\nRisk based\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nNo\r\nDeductible \r\ndiscounts for \r\ncommunes if \r\nrisk prevention \r\nplans are set \r\nin place\r\n-\r\nRisk based\r\nIndemnity \r\nbased\r\nConditional \r\nloans\r\nYes\r\n-\r\n-\r\n-\r\nSimplified \r\npricing based \r\non broad \r\nlocation\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nYes\r\nPremium \r\ndiscounts for \r\nundertaking \r\nrisk reduction/\r\nprevention \r\nmeasures\r\nDeductions \r\nfor premiums \r\nto support \r\nindependent \r\nefforts of \r\npreparedness \r\n(max JYP \r\n50,000 for \r\nincome tax \r\nand JPY \r\n25,000 for \r\nlocal tax)\r\n-\r\nRisk based\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nYes\r\n-\r\n-\r\nInvestments in \r\nrisk prevention \r\nand mitigation \r\nresearch to \r\nbuild resilience \r\n(e.g. informing \r\nbuilding \r\ncodes and \r\nland zoning \r\npractices). \r\nCollaboration \r\nwith local \r\ngovs. \r\n\r\n54\r\nJurisdiction/\r\nscheme\r\nScope\r\nStructure\r\nPeril\r\nType of \r\nproperty \r\ncovered\r\nMandatory \r\nelement \r\n(offer or \r\nuptake)\r\nType of \r\nscheme\r\nDuration\r\nRole in the \r\nmarket\r\nNorway \r\nNorwegian \r\nNatural Perils \r\nPool \r\nMulti-peril\r\nBroader (e.g. \r\ncommercial \r\nproperties\r\nMandatory \r\noffer \r\nPrivate \r\nPermanent\r\nResidual \r\nprovider\r\nRomania \r\nNatural Disaster \r\nInsurance Pool \r\nMulti-peril\r\nResidential \r\nonly\r\nMandatory \r\nuptake\r\nPrivate \r\nPermanent\r\nResidual \r\nprovider\r\nSpain \r\nConsorcio de \r\nCompensación \r\nde Seguros \r\nMulti-peril\r\nBroader (e.g. \r\ncommercial \r\nproperties\r\nMandatory \r\noffer \r\nPublic-private\r\nPermanent\r\nResidual \r\nprovider\r\nSwitzerland \r\nSwiss National \r\nHazard Pool \r\nMulti-peril\r\nBroader (e.g. \r\ncommercial \r\nproperties\r\nMandatory \r\nuptake\r\nPrivate\r\nPermanent\r\nSole provider\r\nUK \r\nFlood Re\r\nFloods\r\nResidential \r\nonly\r\nNo mandatory \r\nrequirement\r\nPublic-private\r\nTemporary\r\nSole provider\r\nUS \r\nNational Flood \r\nInsurance \r\nProgram (NFIP)\r\nFloods\r\nBroader (e.g. \r\ncommercial \r\nproperties\r\nNo mandatory \r\nrequirement\r\nPublic-private Permanent\r\nSole provider\r\nUS \r\nState Fair Access \r\nto Insurance \r\nRequirements \r\nPlans (State FAIR \r\nplans) – available \r\nin 33 states\r\nTypically \r\nmulti-peril\r\nTypically, \r\nbroader (e.g. \r\ncommercial \r\nproperties\r\nNo mandatory \r\nrequirement \r\nPublic-private\r\nPermanent\r\nResidual \r\nprovider\r\nSource: Geneva Association, based on data from EIOPA and ECB, US Department of Treasury, and Federal Insurance Office175\r\n175\t EIOPA and ECB 2024; US Department of Treasury, Federal Insurance Office 2025.\r\n\r\n55\r\nPremiums & payouts\r\nFinancing & risk transfer\r\nResilience requirements\r\nPremiums\r\nPayouts\r\nPublic \r\nfinancing\r\nRisk transfer \r\nto private \r\nreinsurance \r\nmarkets\r\nInsurance \r\npolicies\r\nPublic \r\nmeasures\r\nPublic/private \r\nmeasures\r\nRisk based\r\nIndemnity \r\nbased\r\nNo public \r\nfinancing\r\nYes\r\n-\r\n-\r\n-\r\nSimplified \r\npricing based \r\non broad \r\nlocation\r\nIndemnity \r\nbased\r\nConditional \r\nloans\r\nYes\r\n-\r\n-\r\n-\r\nRisk based\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nNo\r\n-\r\n-\r\nClimate risk \r\nmodelling/data\r\nRisk based\r\nIndemnity \r\nbased\r\nNo public \r\nfinancing\r\nYes\r\n-\r\n-\r\n-\r\nSimplified \r\npricing based \r\non broad \r\nlocation\r\nIndemnity \r\nbased\r\nNo public \r\nfinancing\r\nYes\r\n-\r\nCan pay up to \r\nGBP 10,000 \r\nmore for \r\nflood resilient \r\nrepairs\r\n-\r\nRisk based\r\nIndemnity \r\nbased\r\nPublic \r\nguarantee\r\nYes\r\nPremium \r\ndiscounts for \r\nundertaking \r\nrisk reduction/\r\nprevention \r\nmeasures\r\nFlood \r\nMitigation \r\nAssistance \r\ngrant \r\nprogramme \r\nprovided by \r\nthe Federal \r\nEmergency \r\nManagement \r\nAgency (which \r\nmanages the \r\nNFIP)\r\nTypically risk \r\nbased\r\nIndemnity \r\nbased\r\nTypically \r\nno public \r\nfinancing\r\nYes\r\nSome offer \r\npremium \r\ndiscounts for \r\nundertaking \r\nrisk reduction/\r\nprevention \r\nmeasures\r\n-\r\n-\r\n\r\n56\r\nAccess Newswire. 2024. Ondas Holdings’ Airobotics and HHLA Sky Partner to Offer Drone Services for Terminal \r\nOperations and Critical Infrastructure in Germany.  \r\nActuaries Institute. 2024. Home Insurance Affordability and Home Loans at Risk. \r\nAlexander, S., and Kaufman, L. 2024. The Quiet Rise of Lightly Regulated Home Insurance. Bloomberg.\r\nAlmasy, S., and Holcombe, M. 2019. California Utility PG&E to Pay $13.5 Billion to Settle Claims from Wildfire Victims. \r\nCNN.   \r\nAmerica First Policy Institute. 2024. California’s Homeowner Insurance Market Freefall: Regulatory folly run amok. \r\nAndersson, K. 2024. State Farm Quits Another 72,000 California Homes. Wildfire Today. \r\nAON. 2025. Climate and Catastrophe Insight. \r\nAPCIA. 2023. Factors Influencing the High Cost of Insurance for Consumers. \r\nAPCIA. 2025. Market of Last Resort: An overview of residual market plans in the U.S. and factors contributing to \r\ntheir growth. \r\nAssociation of State Dam Safety Officials. 2024. New Studies Published on ASDSO’s Dam Failure Website. \r\nAtHome. 2024. Can I Sign a Mortgage Without a Mortgage? Introducing 4 ways to deal with people who can’t join! \r\nAustralian Building Codes Board. 2024. NCC 2022 State and Territory Adoption Dates. \r\nAustralian Government. 2024a. Hazards Insurance Partnership. \r\nAustralian Government. 2024b. Building Ministers’ Meeting: Communiqué June 2024. \r\nAustralian Government. 2024c. Government-funded App Delivers Insurance Savings. \r\nAustralian Government. 2024d. Protecting Australian Homes with a Bushfire Resilience Rating App. \r\nBanco De Espana. 2024. Mortgage Insurance. \r\nBank of Canada. 2023. Climate-Related Flood Risk to Residential Lending Portfolios in Canada. \r\nBateman, T. 2024. Tokyo Expands Underground ‘Temple’ Complex to Counter Climate Change Rains. Reuters. \r\nBeam, A. 2023. 5 Years after California’s Deadliest Wildfire, Survivors Forge Different Paths Toward Recovery. \r\nAssociated Press. \r\nBrangham, W. et al. 2025. California Faces Insurance Crisis as Homeowners Lose Coverage Amid Extreme Weather. \r\nPBS. \r\nBuckles. 2023. French Property Disclosure Obligations. \r\nBuilding Cost Information Service. 2025. BCIS Building Forecast. \r\nCalifornia Department of Finance. 2024. State’s Population Increases While Housing Grows Per New State \r\nDemographic Report. \r\nReferences\r\n\r\n57\r\nCalifornia Department of Forestry and Fire Protection. 2019. CAL FIRE Investigators Determine Cause of the Camp Fire. \r\nCampisi, N., and Nici, D. 2024. California Homeowners Hit Again as The Hartford Nixes New Insurance Policies. \r\nForbes. \r\nCampo-Flores, A., and Haller, M. 2023. The Coastal State where Home Insurance Is Relatively Affordable. Wall Street \r\nJournal. \r\nCanada Wildfire. 2016. Mapping Canadian Wildland Fire Interface Areas. \r\nCanadian Climate Institute. 2025. Close to Home. 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Zillow Introduces First Street’s Comprehensive Climate Risk Data on For-sale Listings Across the US. \r\n\r\nIII\r\n\r\nwww.genevaassociation.org\r\n"},"recipientGroups":[{"recipients":{"parliament":[],"federalGovernment":[{"department":{"title":"Bundesministerium der Finanzen (BMF)","shortTitle":"BMF","url":"https://www.bundesfinanzministerium.de/Web/DE/Home/home.html","electionPeriod":21}}]},"sendingDate":"2025-05-08"}]},{"regulatoryProjectNumber":"RV0020542","regulatoryProjectTitle":"Proportionale und risikobasierte Ausgestaltung der Insurance Recovery and Resolution Directive (IRRD)","pdfUrl":"https://www.lobbyregister.bundestag.de/media/8b/91/650661/Stellungnahme-Gutachten-SG2512080023.pdf","pdfPageCount":5,"text":{"copyrightAcknowledgement":"Die grundlegenden Stellungnahmen und Gutachten können urheberrechtlich geschützte Werke enthalten. Eine Nutzung ist nur im urheberrechtlich zulässigen Rahmen erlaubt.","text":"Insurance Europe urges to ‘stop the clock’ on IRRD: why a pause is necessary\r\n\r\nProportionate recovery and resolution regimes for European insurers \r\n\r\nIf Europe is to restore and strengthen European competitiveness, administrative burdens from regulation must be reduced. The European Commission has set out a vision for an implementation and simplification agenda that delivers fast and visible improvements for people and business on the ground. The Commission has announced that they will address overlapping, unnecessary or disproportionate rules that are creating unnecessary burdens for EU businesses through “Omnibus” packages. The Insurance Recovery and Resolution Directive (IRRD) is a good example of such rules as it goes well beyond international requirements for recovery and resolution: e.g. FSB Key Attributes for Resolution. Other jurisdictions have more proportionate requirements for insurers, meaning IRRD is creating unnecessary burdens and a competitive disadvantage for EU insurers.\r\n\r\nIn this context, Insurance Europe calls for a “stop-the-clock” initiative on the IRRD.\r\n\r\nA pause in the legislative timelines for the IRRD is necessary to give legislators, in co-ordination with other stakeholders including the industry and EIOPA the opportunity to make a proper analysis of what is truly necessary to protect policyholders and beneficiaries and, additionally, financial stability in Europe in relation to failing insurance companies.\r\nThe IRRD should be a risk-based framework that is proportionate to the low levels of systemic risk posed by the insurance sector and is adapted to the individual insurance undertaking’s risk profile, the given member state, and the national situation. This framework should be supported by a full impact assessment at all levels of regulation and have fewer and more precise delegations to Level 2 and 3 measures.\r\n\r\nBackground\r\nThe IRRD will apply from 30 January 2027. Currently, the European Insurance and Occupational Pensions Authority (EIOPA) is developing technical standards and guidelines to facilitate this implementation. As part of this process, they are conducting a series of public consultations allowing stakeholders to provide feedback on key topics.\r\n\r\nKey issues with the IRRD proposals for the technical standards and guidelines as they stand are:\r\n\r\n- disproportionate requirements relative to the risk and benefits, especially the information required for resolution planning, which is generic and not focussed on a specific resolution strategy;\r\n- limited impact on protecting financial stability,\r\n- potentially large costs and administrative burden for companies,\r\n- wide scope, (significantly larger than other jurisdictions),\r\n- broad definitions, (such as for resolution objectives and critical functions), leading to unclarity and uncertainty,\r\n- challenging timelines for implementation, and\r\n- timing of the application of the IRRD and the upcoming review of insurance guarantee schemes (IGS).\r\n\r\nIn addition, the ongoing EIOPA consultations and IRRD instruments yet to be completed have demonstrated that there are still many areas for clarification. A postponement will allow for better thought-out regulations and will benefit both resolution authorities and insurance companies.\r\nIt is necessary to act now to avoid a similar situation to the corporate sustainability reporting (CSRD, CSDDD…) where regulation is already partly in force. For the IRRD, it is a much more straightforward exercise to ‘stop the clock’ and tailor regulation that causes unnecessary burdens to European insurance companies.\r\nProceeding with the IRRD technical standards and guidelines in their current (draft) form and at the\r\ncurrent pace, runs contrary to the European Commission’s implementation and simplification agenda, by introducing an overly detailed, burdensome and largely unnecessary framework.\r\n\r\nIssues prompting the pause\r\n\r\nInsurance Europe has identified the following issues:\r\n\r\nDisproportionate requirements relative to the risks and benefits\r\nThe IRRD proposals are extensive and will require significant resource from undertakings, regulators and resolution authorities to implement. For example, the draft instructions for\r\nthe reporting templates alone run to 43 pages. However, from the perspective of financial\r\nstability, both the risks that insurers pose and the benefits of a wide-ranging resolution\r\nscheme such as IRRD, are significantly lower for the insurance sector compared to banking. If\r\nanything, the focus of the IRRD should be in the first place on the protection of policyholders\r\nand beneficiaries through orderly resolution, and not be focused on financial stability.\r\n\r\nLimited Impact on Financial Stability Protection\r\nThe stated purpose of the IRRD includes safeguarding financial stability (in addition to the\r\nprotection of policyholders and beneficiaries), but there is limited systemic risk in the insurance\r\nsector. Indeed, EIOPA’s report on Systemic Risk and Macroprudential Policy in Insurance, while\r\ncautioning against theoretical potential impacts from insurers, noted “a broad agreement\r\nthat traditional insurance activities (be it in the life, non-life and reinsurance sectors) [do not]\r\ncontribute to systemic risk”.\r\nWhat little systemic risk there is, is already addressed by the comprehensive existing\r\nrequirements under Solvency II and the safeguards therein are effective and provide for a very\r\nlow likelihood of any required resolution action under IRRD. The current regulatory framework\r\nis calibrated to (theoretically) limit insolvencies to 0.5% of companies. The added benefits of\r\nrecovery and resolution above this Solvency II level of protection do not justify the extensive\r\nrequirements proposed under the IRRD. According to the EIOPA 2021 document “Failures\r\nand near misses in insurance” (EIOPA-BoS-21/394), most of the insurance failures and near\r\nmisses in EIOPA’s database of such events occurred before Solvency II was introduced. As the\r\nreport states, the introduction of Solvency II has contributed to the prevention of failures.\r\nIt should be noted that near misses can be interpreted as a as an effective action of the\r\nsolvency supervisory authority (not requiring resolution).\r\n\r\nCosts and Administrative Burden\r\nA comprehensive cost/benefit analysis has not performed by the Commission. Given recent\r\ndiscussions on financing arrangements, it is clear that the costs of the IRRD will be significant\r\nand deserve to be properly assessed before implementation. In addition, the administrative\r\nburden on companies from the reporting templates set out in the draft Implementing\r\nTechnical Standards, and from other potential requirements is likely to be substantial, while\r\nthe benefits may be limited. This imbalance should be reassessed in light of the Commission’s\r\nwider simplification agenda. For example, the need to maintain playbooks, in addition to\r\nthe resolution plans, maintained by resolution authorities and supported by significant\r\ninformation requirements for insurance companies is potentially onerous.\r\nThis is in addition to direct costs which may be faced by undertakings funding Financing\r\nArrangements under Article 81. These may vary greatly between location of authorisation\r\ngiven the discretions available to resolution authorities in this area.\r\n\r\nWide Scope (significantly beyond other jurisdictions)\r\nIndustry is supportive of implementing the international requirements for recovery and\r\nresolution: however, the European version goes beyond the FSB Key Attributes for Resolution.\r\nOther jurisdictions have more proportionate requirements for insurers: for example,\r\nconsidering Australia, Japan and Singapore:\r\n- None of these countries has an arbitrary minimum market threshold for inclusion in\r\nrecovery and resolution, instead using risk-based assessments of which companies are\r\nsystemically important. Currently, in Japan, no companies are required to hold resolution\r\nplans: in Singapore, the number is four and in Australia eleven (although there is discretion\r\nto add additional companies performing critical functions).\r\n- In all cases, the volume of regulation is significantly lower: for example, the Singaporean\r\nrecovery and resolution requirements comprise a notice which is five pages long and 24\r\npages of accompanying guidance.\r\n- None of these jurisdictions require regular reporting by entities, with companies expected\r\nto be able to provide necessary data to supervisors on request.\r\n\r\nChallenging Timelines\r\nImplementation of the IRRD is likely to be in 2027/2028 at same time as Solvency II. This\r\nwill create significant operational challenges and bureaucratic burden for many insurers,\r\nsupervisors and resolution authorities, given the significant overlap between the staff involved\r\nin both implementations. For example, adjustments to SII reporting (QRTs, SFCR, RSR) and\r\nthe new QRTs for resolution planning are often being handled by the same risk and IT staff.\r\nCompanies need to be given sufficient time to analyse the new regulations, organise internal\r\ntraining and recruit additional staff where necessary.\r\n\r\nInsurance guarantee schemes\r\nArticle 98 of the IRRD provides that the European Commission, after having consulted EIOPA,\r\nshould report on insurance guarantee schemes (IGS) by 29 January 2027, at the same time\r\nas IRRD will be implemented. However, decisions regarding the harmonisation of IGS and\r\nthe implementation of IRRD should be made in a coordinated manner. Both initiatives carry\r\nsignificant cost and operational implications for insurers and policyholders. Proceeding with\r\neither in isolation risks duplication, inefficiency, and unnecessary burdens and, thereby, costs.\r\nThese costs will in the end lead to higher premiums for policy holders.\r\n\r\nInsurance Europe therefore calls for a pause on both the IRRD and any harmonisation of IGS, to allow for a comprehensive and proportionate assessment of their combined impact and necessity.\r\n\r\nAn alternative path:\r\nthe way forward following the stop-the-clock\r\n- A proper cost-benefit analysis is fundamental: most jurisdictions outside of Europe have\r\nchosen a much more proportionate approach to recovery and resolution in the insurance\r\nsector. A fundamental review of the IRRD is needed to identify areas whether the substantial\r\ncosts of IRRD outweigh the gains, and where sensible adjustments could be made to minimise\r\nthe workload on both companies and supervisors & resolution authorities.\r\n- Establish risk-based and proportionate scope for planning requirements.\r\n- Delay and phase-in of the implementation of IRRD to:\r\nFacilitate a comprehensive discussion and assessment of potential funding\r\nrequirements: early discussions demonstrate a lack of consistent understanding on what\r\nresolution funding should encompass and its purpose. More time is needed to assess this,\r\nnotably its interaction with a potential harmonisation of IGS.\r\nAvoid extensive and burdensome interaction with SII review changes: undertakings\r\nwill need to allocate significant resources during 2027 and 2028 to the implementation\r\nof Solvency II changes (as well as other requirements such as EU-stress testing).\r\nBenefit from experience: implementation in the banking sector of the BRRD clearly\r\nshows that a multi-year iterative discussion between authorities and undertakings is\r\nneeded to create the necessary materials.\r\n- Meaningful rationalisation of Level 2 and 3 requirements is needed. The draft Level 2 and Level\r\n3 texts prepared by EIOPA add significantly to the operational requirements arising from the\r\nIRRD. A clearer and more proportionate approach is needed which should include:\r\nRemoval of mandatory data reporting requirements: to give national authorities the\r\nflexibility to ask only for truly necessary information and reduce burden on companies.\r\nReduction in minimum requirements for pre-emptive recovery plans: general\r\ndescriptions, the framework of indicators, the remedial actions and the communication\r\nstrategy should be limited to decision-useful information.\r\nThe scope of critical functions should be realistic: critical functions is a banking\r\nconcept which has does not translate well into insurance sector. Notably, reinsurance,\r\ninvesting and actuarial services can easily be substituted and are therefore not critical by\r\ndefinition.\r\nThe assessment of resolvability should not be a tick-box exercise: the current\r\nproposed guidelines pose unnecessary burden for insurers. To reduce this, the guidelines\r\nshould be phrased as items that could be considered rather than mandating that they\r\nshould be a minimum.\r\n\r\nInsurance Europe is the European insurance and reinsurance federation. Through its 39 member bodies — the national insurance associations — it represents insurance and reinsurance undertakings active in Europe and advocates for policies and conditions that support the sector in\r\ndelivering value to individuals, businesses, and the broader economy.\r\n\r\n© Insurance Europe aisbl, October 2025 \r\nwww.insuranceeurope.eu"},"recipientGroups":[{"recipients":{"parliament":[],"federalGovernment":[{"department":{"title":"Bundesministerium der Finanzen (BMF)","shortTitle":"BMF","url":"https://www.bundesfinanzministerium.de/Web/DE/Home/home.html","electionPeriod":21}}]},"sendingDate":"2025-11-10"}]}]},"contracts":{"contractsPresent":false,"contractsCount":0,"contracts":[]},"codeOfConduct":{"ownCodeOfConduct":true,"codeOfConductPdfUrl":"https://www.lobbyregister.bundestag.de/media/3c/f9/650660/HNR_Code-of-Conduct_DE.pdf"}}