Resilience Building in Action
New Risks Require New Tools: Rethinking Insurance for a Climate-Changed World
The Problem: Climate Disasters Are Escalating, and Insurance Is Disappearing
The Los Angeles wildfires are just the latest reminder that climate-driven disasters—wildfires, floods, extreme heat, and hurricanes—are becoming more frequent, severe, and financially devastating.
Yet, as risks surge, private insurers are retreating. In California and across the U.S., insurers are dropping coverage or raising premiums in high-risk areas, leaving homeowners, businesses, and local governments to bear the financial burden alone.
Unlike private companies, governments can’t opt out. Cities and states must continue providing essential services, rebuilding after disasters, and safeguarding communities—but with fewer financial tools to manage growing risks. If this trend continues, local governments could face overwhelming costs, threatening economic stability.
The Insurance Design Sprint: Breaking Silos, Finding Solutions
Recognizing this crisis, Resilient Cities Catalyst (RCC), California Forward (CA FWD), and the Federal Reserve Bank of New York convened leaders from government, insurance, finance, philanthropy, and policy for a two-day Insurance Design Sprint in late 2024. The goal? To break down silos and rethink how communities manage climate risk.
What We Learned
Insurance alone isn’t enough—communities need proactive solutions to reduce risk.
Public and private sectors must work together to keep insurance markets stable.
New financial tools can help communities prepare for disasters before they happen.
The Breakthrough: Climate Resilience Districts
The sprint led to the creation of the Climate Resilience District Incubator, a partnership between CA FWD and RCC to pilot and scale a new governance model that:
Pools financial resources across cities, counties, and regions to fund wildfire mitigation, flood protection, and extreme heat adaptation.
Aligns public and private investments to stabilize insurance markets and reduce risk.
Uses financial tools like tax-increment financing to make resilience projects more sustainable.
Shifts from reactive recovery to proactive prevention, reducing long-term disaster costs.
What’s Next?
RCC and CA FWD are launching pilot Climate Resilience Districts in California and on the East Coast (potentially New York or Connecticut) to test and refine this approach. Over the next three years, these pilots will:
Demonstrate how shared investment in resilience can stabilize insurance markets.
Test new partnerships and financing models for disaster prevention.
Create a learning network to scale solutions nationwide.
Why This Matters Now
Climate risk isn’t going away—but by investing in resilience today, we can protect communities, stabilize insurance markets, and prevent local governments from bearing the entire financial burden of disasters.
With insurers pulling back, it’s time for a new approach. The Insurance Design Sprint showed that solutions exist—we just have to act.