This past spring semester (April 15), the Risk and Insurance (RI) Department gathered with industry professionals for an engaging Co-Curricular Learning Board (CCLB) event, Climate Risk Meets Home Insurance: Exploring a Bold Solution. The event examined the challenges facing the homeowners insurance industry as it comes under increasing pressure from severe climate-related risks.
Sixty-five students, eleven company representatives from American Family, Milliman, Swiss Re, and TruStage, along with RI faculty, examined the systemic pressures driving homeowners insurance premium increases and explored US Re, a bold, innovative proposal designed to help stabilize the market. The featured speakers were RI faculty members Associate Professor Benjamin Collier and Assistant Professor Philip Mulder, who are members of the team that developed the US Re concept.
We kicked off the event with an insightful presentation from faculty member Ben Collier, who provided a data-driven look at the current state of homeowners insurance premiums in Florida. One of my key takeaways from his presentation was the staggering impact of reinsurance costs on policyholders’ premiums, particularly in high-risk states like Florida. As climate-related disasters increase in frequency and severity, the cost of reinsurance has skyrocketed, and those expenses are ultimately passed on to policyholders. Understanding this often “invisible” cost is essential for industry professionals as they seek innovative solutions to the challenges facing the homeowners insurance market.
Following the presentation, we shifted into small discussion groups. Students and industry professionals sat together at tables to brainstorm potential solutions to these mounting pressures. We explored everything from incentivizing relocation out of high-risk areas to investing in stronger infrastructure with the goal of reducing claims. These conversations were eye-opening, giving us a firsthand look at how the real world operates, where complex challenges rarely have a single right answer.
We then transitioned to a segment of the event introducing US Re, a proposed national reinsurance program. Presented by faculty member Philip Mulder, the session highlighted that while such a program would likely feature very high attachment points, it also offers a distinct financial advantage. Because the government has a significantly lower cost of capital than private entities, a federal backstop could provide reinsurance at a lower cost.
We discussed both the strengths and potential drawbacks of this solution, sparking an examination of the role of the public sector in backstopping private risk and helping ensure that homeowners insurance remains affordable in the future.
It was a privilege to converse with the professionals in attendance. Their ideas added industry insights to our academic discussions. I would like to extend a sincere thank you to the CCLB companies whose support makes these vital conversations possible: American Family Insurance, Milliman, Swiss Re, and TruStage. Your commitment is truly appreciated.
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