State FAIR plans could become hazard mitigation service providers in addition to being insurers of last resort. These plans could coordinate with state emergency management offices to offer resilience audits, where a trained professional can point out specific ways a home can be made safer from expected disasters and hazards (e.g. wildfire in the West, hail or tornadoes in the Midwest, wind damage in the Southeast). In addition to providing information on how policyholders can reduce their risks, states could also secure funding to help implement practices like more resilient roofs, defensible space, and more. Hazard mitigation measures can be tied to FAIR plan requirements to reduce risks and costs associated with insuring properties in high-risk areas.
Just as FAIR plans could work directly with their policyholders, states need to step up to reduce risks for homeowners at broader spatial scales through climate adaptation measures. Strategies like strengthening building codes, adopting forward-looking climate resilience plans and more robust land use criteria, and improving wetlands protections and floodplain management are tangible ways that state governments can help reduce the impact of disasters.
The implementation of hazard mitigation by homeowners, along with climate adaptation by government and private sector should ultimately lead to:
• Reduced property damage from climate disasters
• Reduced claims payouts due to extreme weather events
• Lowered risk for insurers and FAIR plans
• Continued protection for at-risk regions and communities
This, in turn, should help lower insurance claims and stabilize premiums, making coverage more affordable and sustainable for homeowners in risky regions.
Existing programs that incentivize resilience
Hazard mitigation and climate adaptation enhance community resilience and the long-term viability of FAIR plans. Programs like the Fortified Roof program in Alabama and the NFIP understand this concept. By incentivizing policyholders to adopt risk-reduction measures through premium discounts, these plans encourage proactive safety efforts. Collaboration with government agencies for funding and large-scale projects can further reduce systemic risks, ensuring that FAIR plans remain financially stable and capable of providing essential insurance to at-risk communities.
In Alabama, the Alabama Department of Insurance administers a voluntary program, the Fortified Roof program, that encourages insurers to provide discounted premiums for homes that have been reinforced with a “Fortified” designated roof. Other states can work toward similar interventions to ensure reduced insurance premiums for policyholders, increased community resilience to climate disaster, and create a more sustainable built environment.
The NFIP, which is administered by the Federal Emergency Management Agency (FEMA), unlike private insurance companies, not only provides government-backed insurance against flood damages, but also provides assistance to communities and individuals to help reduce the risk of flooding.
While insurance itself will not solve the climate crisis, it can certainly become a lever to incentivize the protection of our communities through more resilient building. Hazard mitigation can complement FAIR plans by helping reduce the vulnerability of homes and neighborhoods, leading to safer communities, reduced financial strain on insurance programs, and more affordable access to coverage for at-risk populations.
