Reimagining Homeowners Insurance in the Face of Climate Risk
The U.S. Homeowners insurance market is under increasing strain due to the escalating risks posed by climate change. Extreme weather events, including wildfires and hurricanes, are driving up costs and reducing availability, impacting household financial stability and disaster recovery efforts. Recent discussions and proposals aim to address these challenges through innovative solutions, including a potential federal role in reinsurance.
Event Recap: The Hamilton Project and Hutchins Center Discussion
On March 18, 2026, The Hamilton Project and the Hutchins Center on Fiscal and Monetary Policy at Brookings hosted an event focused on homeowners insurance and climate risk [1]. The event brought together insurance commissioners, academics, and industry experts to explore policy solutions for a changing climate.
Key Discussions and Insights
Minnesota Commerce Commissioner Grace Arnold and Colorado Insurance Commissioner Michael Conway highlighted the primary drivers of homeowners insurance premium increases, with hail risk being a significant concern in both states [1]. They discussed state-level initiatives to improve affordability and availability, such as Minnesota’s mandated discounts for homeowners investing in resilience measures and Colorado’s efforts to refine risk modeling and incentivize mitigation efforts.
The Case for Federal Reinsurance
A key proposal discussed was the creation of a federal reinsurance entity, dubbed “US Re,” to strengthen the U.S. Homeowners insurance market. Benjamin Keys of the University of Pennsylvania outlined the potential benefits of such a program, including ensuring consistent and affordable coverage, reducing burdens on state and local governments, and stabilizing mortgage and housing markets [2], [3].
Lessons from International Models
Adam Solomon of NYU shared insights from public natural catastrophe reinsurance programs in other countries, emphasizing the importance of risk-based pricing, mitigation incentives, and broad participation [2].
Private Reinsurance Perspective
Thomas Holzheu of Swiss Re Institute offered a perspective from the private reinsurance industry, arguing that premium increases are primarily driven by claims and rising catastrophe losses, rather than capital costs or market inefficiencies [2].
Improving the Insurance Process
Rebecca Diamond of Harvard University shifted the focus to the post-disaster experience, highlighting the challenges homeowners face when filing claims and the lack of comprehensive data on claim resolution processes. She emphasized that understanding the insurer’s role in recovery is crucial, potentially even more so than focusing solely on premiums [3].
Scaling Mitigation Efforts
Roy Wright of the Insurance Institute for Business and Home Safety discussed the require for both government and private sector involvement in scaling mitigation efforts. He argued that policy interventions, such as discounts, are most effective when implemented during times when homeowners are already taking action, like replacing a roof after a storm [3].
Looking Ahead
Panelists identified key areas for improvement, including improving data access on insurance policy usage, exploring alternatives to coverage ceilings that don’t fully cover replacement costs, and focusing on restraining the factors driving up insurance premiums [3]. These discussions represent a critical step towards building a more resilient and affordable homeowners insurance market in the face of increasing climate risks.