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Global disaster losses have exceeded $200 billion annually over the past decade, with uninsured losses now accounting for more than half of the total, highlighting the need for new financing structures to mobilise private capital alongside governments and insurers, according to a report by the Milken Institute, produced in partnership with Marsh.
The new report comes amid increasing weather risks globally, with devastating effects on livelihoods and communities putting pressure on future balance sheets.
Rebuilding and recovery from global disasters are also taking longer, with cascading impacts across residents, companies, and governments. For instance, more than a year after the California wildfires, seven in 10 survivors still remain displaced from their homes.
Insurance companies have warned about the gap between growing resilience needs and today’s inadequate levels of investment, with coverage shrinking or becoming more costly in high-risk areas.
Despite this, at-risk communities do not have the resources to invest proactively in resilience to close this protection gap and reduce their risk.
The report stressed that the gap between actual investment in resilience and what is needed will continue to increase unless new financing structures are developed so private capital can play a key role alongside governments and insurers.
Caitlin MacLean, Managing Director of Catalytic Capital, Milken Institute, said, “Resilience is an investment in our communities and our future, and the evidence shows that resilience pays for itself. IBHS FORTIFIED roof designations, for instance, started with a state-enabled grant program and today in Alabama, 80% of FORTIFIED roof homeowners installed roofs without relying on state financial help, recognising the return on investment. The program has now expanded to 34 states.
“This report gives investors, insurers, and communities solutions to move capital where it’s needed before the next disaster strikes, not after.”
Building on research, a series of off-the-record stakeholder insights, a full-day Lab workshop in LA and subsequent virtual working groups, the report identified pathways for greater policy and capital alignment in strengthening neighbourhoods.
It outlined five models designed to attract institutional and private-sector capital: a stakeholder-driven community plan with early insurer engagement; a private-sector-led revolving loan fund; a district-backed resilience bond; a resilience innovation technology investment fund; and a state policy playbook.
Nick Studer, CEO, Marsh Risk, added, “Extreme weather is reshaping the risk landscape, and resilience can no longer be viewed as optional or a cost to be avoided.
“At Marsh, we believe the future depends on smarter collaboration between the public and private sectors to mobilise capital, strengthen communities, and reduce losses before disaster strikes. We’re proud to work with the Milken Institute on a report that offers actionable solutions to help future-proof American communities in the face of growing climate risk.”
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