Alternative Insurance Solutions to Extreme Weather Events


Extreme weather events continue to rise in frequency and severity. As of July 11, 2023, the United States has experienced 12 weather/climate disaster events with losses exceeding $1 billion each. These events include one flooding event, 10 severe storm events, and one winter storm event. More recently, the island of Maui sustained a wildfire with estimates of $5.5 billion in damages. Rather than taxpayers and policyholders paying for damages, it may be time to look at alternatives.

Climate Migration

A global temperature rise of three degrees would displace over 100 million people.1 Densely populated cities and rural areas will not escape damage. Those impacted by the climate events would be forced to leave their homes and communities permanently.

Loss of Habitable Land and Government Buyouts

The U.S. has lost a considerable amount of land due to climate-related disasters. The list of cities below is not all inclusive.2

  • Burrwood, Louisiana: Uninhabitable due to erosion/subsidence
  • Holland Island, Maryland: Uninhabitable due to erosion/sea-level rise
  • Valmeyer, Illinois: Uninhabitable due to river flooding
  • Historic Shasta and Helena, California: Uninhabitable due to wildfires
  • Cumberland Island, Georgia: Uninhabitable due to hurricanes and sea-level rise

The U.S. government provides financial compensation to some communities impacted by global warming. For example, if an area experiences repeated flooding, the government may “buy out” flood-prone properties and assist in relocating the residents to areas with lower flood risk.

The intent of this program is to save taxpayers billions in disaster relief. However, government buyouts are infrequent, slow and costly. Failing to assist communities impacted by extreme weather will lead to migration, which is also costly and can create various humanitarian crises.

Government-Led Managed Retreat

As global warming causes glaciers to melt, sea levels continue to rise. Communities like Isle de Jean Charles in Louisiana continue to lose land. Since the 1930s, Louisiana has lost more than 2,000 square miles of land.3 The loss is equivalent to approximately one football field every hour.4

The state of Louisiana used federal funds to relocate the community of Isle de Jean Charles. The cost was $50 million to move 100 people. This practice is known as managed retreat. Managed retreat may be a viable option for communities that are frequently ravaged by climate change events; however, governments are slow to accept the strategy. It is costly and the move needs to be planned well in advance.

Community-Based Adaptation

Community-based adaptation to climate change is a process based on the community’s priorities, needs, knowledge and capacities. People are empowered to plan for and cope with the impacts of climate change. A prime example of community-based adaptation is Babcock Ranch in Florida.5

This solar-powered town was developed by former professional American football player Syd Kitson. Currently housing 6,000 residents, the community did not lose power during Hurricane Ian. Kitson’s goal was to create “the most environmentally responsible, the most resilient new town that’s ever been built.”

Florida is not the only state implementing community-based adaptation. California is also promoting change. California state law requires homes to be built with wildfire-resistant materials.6 Home builders argue that fireproofing is too expensive; however, a study conducted by Headwaters Economics determined that using fireproofing materials increases overall costs by $18,200 to $27,100.7

Government and Insurance Partnership

Insurance companies have invested heavily in technology that assists in predicting climate-related disasters. Insurers, reinsurers, brokers and clients all benefit from improved processes for gathering, analyzing and sharing risk data and information.

Exchanges of information between brokers and underwriters facilitates informed decisions on placing and pricing insurance. The insurance industry continues to work with technology providers, government agencies and other partners to develop effective, innovative solutions that can be used to manage the dangerous risks associated with extreme weather and climate change.


The insurance industry has started spreading the risk posed by climate-related disasters via reinsurance. Reinsurance acts as a backup for the insurance company. A carrier transfers risk to another company to reduce the likelihood of large claim payouts. This allows the insurer to remain solvent and recover all or part of a payout at time of loss. Reinsurance is costly and these costs are passed to policyholders.