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Climate Change and Insurance: Embracing Resilience for Private Market Survival

Author

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  • John A. Roper
  • David G. Casagrande
  • Paolo Bocchini

Abstract

Private insurance is a major mechanism for managing natural disaster risk in the U.S. Public programs cannot generate sufficient capital to provide adequate protection to homes and businesses. Our literature review indicates that disaster impacts are increasing because of climate change and continuing development in high‐risk areas, which is undermining methods used by private insurance and reinsurance industries to spread risk, including premium pricing, peril region pooling, and catastrophe bonds. Financial sustainability could be enhanced by investing in resilience and expanding coverage to vulnerable populations where property owners lack capital for resilience improvements and slow recovery times increase business interruption losses. Public–private partnerships using tools like resilience bonds would benefit both the public and private sectors, as well as local businesses and homeowners. We describe how catastrophe modeling can estimate financial savings from reduced losses and optimize resilience bond pricing, rebates, and investment return.

Suggested Citation

  • John A. Roper & David G. Casagrande & Paolo Bocchini, 2025. "Climate Change and Insurance: Embracing Resilience for Private Market Survival," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(6), pages 8499-8510, December.
    • Handle: RePEc:wly:sustdv:v:33:y:2025:i:6:p:8499-8510
    DOI: 10.1002/sd.70106
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