As Climate Volatility Intensifies, How Can Insurers Underwrite Resilience?

Insurers are facing mounting pressure in high climate risk states such as California. Despite escalating pay-outs, the California Department of Insurance has mandated private insurers to cover fire-prone areas proportionate to 85% of their statewide market share, and implemented a one-year moratorium on policy cancellations in key wildfire zones. For insurers, this means that simply pricing or avoiding risk is no longer a viable business strategy. Instead, those operating in risky zones need to identify high-resilience areas where adaptation measures provide a cushion against otherwise unmanageable risk.

Insuring Risk: A Resilience-Adjusted Approach

AlphaGeo ’s proprietary Climate Risk & Resilience Index uniquely combines physical risk and resilience-adjusted risk scores, the latter reflecting the impact of local adaptation measures. This dual-scoring system enables users to differentiate high-risk locations, highlighting areas where strong adaptation capacity can mitigate the real-world effects of climate risk.

The maps of California below illustrate how our Risk & Resilience Index scores work together to reveal “safer” locations within a high-risk state.

Together, these maps illustrate that while physical wildfire risk is high across California, resilience-adjusted scoring helps reveal important distinctions:

• Northern and Central California exhibit lower resilience-adjusted risk, suggesting the presence of effective wildfire adaptation measures that help mitigate some degree of risk
• Southeastern California, however, remains high-risk across both maps, indicating insufficient wildfire adaptation measures to meaningfully reduce risk

These insights allow insurers to prioritize areas of higher resilience, while avoiding areas where losses are likely inevitable.

Beyond Risk Scoring: Planning for Adaptation

The foundation of our Resilience-adjusted Risk Scores is a uniquely engineered dataset that quantifies the hazard-specific adaptation capacity of any location on earth. A location’s resilience to wildfire risk, for example, is captured using key adaptation features such as the proximity to fire response infrastructure and the presence of fire detection infrastructure.

This data helps identify adaptation gaps at a granular level and equips insurers for a more proactive role in strengthening the resilience of their coverage zones. Insurers can leverage these insights to:

• Advise policy holders on targeted adaptation measures to enhance asset resilience
• Calibrate premiums based on the degree of adaptation to specific risks
• Engage with local governments on essential public adaptation investments

Underwriting Risk and Resilience in a Complex Future

The future of insurance isn’t just about avoiding risk — it’s about adapting and innovating to stay competitive. AlphaGeo’s risk-and-resilience framework equips insurers with the insights needed to navigate customer expectations, regulatory demands, and long-term business sustainability.

To learn more about how AlphaGeo’s predictive analytics and advisory services can transform your underwriting strategies, please visit alphageo.ai, or contact us at [email protected].