Driving Loss Reduction Through State-Created Residual Insurance Markets

This report presents an analysis of state residual insurance programs, which are designed to offer financial protection to property owners unable to secure insurance in the private market. As climate change exacerbates the frequency and severity of natural disasters, these programs are becoming increasingly vital. The report outlines the fiscal challenges faced by residual markets due to rising risks and emphasizes the necessity of risk mitigation strategies to enhance the insurability of properties. It details three primary approaches adopted by these programs to encourage property owners to invest in mitigation measures: premium reductions for verified risk reduction actions, no-cost insurance endorsements for resilient rebuilding, and grant programs for disaster mitigation retrofits. Additionally, the report identifies best practices for implementing effective loss reduction initiatives, including making the business case for mitigation, simplifying participation for policyholders, fostering partnerships, and establishing a culture of risk reduction within the programs. Overall, the report aims to provide recommendations for enhancing risk reduction efforts in state residual insurance markets.