You may have known that insurance companies are experiencing increased costs due to climate-related events. This includes payouts for damages caused by hurricanes, floods, wildfires, and other extreme weather events. These rising costs can lead to higher premiums for policyholders. But what you may not have known is that insurance companies are actually insured by reinsurers.

NIBS, through its Resilience Incentivization Roadmap, focuses on aiming to create a roadmap that provides actionable strategies for stakeholders to enhance the resilience of buildings and infrastructure across the nation. We’ve been breaking down the relationship between stakeholders and specifically insurers, with an emphasis on supporting the end user or homeowner and how to enact viable strategies that reduce costs and liability. 

Over the last decade, the landscape has gotten more and more uncertain, with insurance companies dropping out of states and refusing to write policies in risky neighborhoods. This also puts a damper on the kinds of resources available to the average homeowner who is, more often than not, in the dark about what all their policy covers and what they can do to reduce their costs.

The increasing frequency and severity of these events have resulted in higher payouts for insurance companies, impacting their financial stability. This has necessitated reevaluation of risk models and pricing strategies. This also impacts reinsurance policies, the policies that insurers use to offload their risk, as when these policies get more pricey, it leaves less risk to be assigned for actual policyholders because the margins get slimmer.

Insurance companies use various types of information to calculate premiums for different types of insurance policies. The goal is to assess the risk associated with insuring a particular individual, property, or entity.