When Insurance and Policy Align, Resilience Scales

4 lessons from state programs to strengthen homes and insurance markets in a world of increasing extreme weather.

As the 2026 winter marked by crippling winter storms gives way to an already-deadly tornado season, extreme weather is becoming more and more the norm. With damage and recovery costs climbing, insurance markets are struggling to keep pace. As damaging weather events become more frequent and more costly, premiums rise and private insurers pull out of risky markets all together. This is showing up on state balance sheets, while raising fears that rising costs and escalating private insurer exits could feed off one another, driving (what some have described as an insurance market “doom loop”).

The good news is, we already have many of the technical solutions, from stronger materials to early warning systems, that could better protect homes and businesses from extreme weather-related loss. Resilience is often a solid economic bet: studies find that every $1 invested in resilience can generate anywhere from $13 to more than $40 in long-term benefits. Yet even for solutions with a compelling positive return on investment, adoption remains slow compared to rising damages. What is holding us back today is often not a lack of engineering solutions but a lack of market alignment.

Homeowners, insurers, and governments often operate with mismatched incentives. Homeowners face high up-front costs and long pay-back periods. Insurers price risk annually. Governments and taxpayers are left to absorb post-disaster losses. This results in  governments, households, and businesses spending far more money rebuilding than preventing damage in the first place. The social and economic disruption of displaced families and disrupted businesses waiting on delayed insurance payouts is compounded by the heat-trapping carbon emissions involved in reconstruction.

However, there are hopeful signs that these markets could work differently. In several states, insurance regulators and public insurers are successfully encouraging homeowners to upgrade to storm-resistant building standards. By aligning incentives, these programs are changing the economics of resilience for households and communities. This article identifies lessons from how structured financial incentives and coordination across public and private actors can scale resilience investment.

 

 

What do state-level home resilience incentives look like today?

A growing number of states offer two main types of home resilience incentives today:

• Discounts on insurance premiums linked to verified home improvements (offered directly by residual insurers or required of private insurers operating in-state)
• Matching grants to help homeowners finance the improvements

 These programs are not new. Florida’s My Safe Florida Home program launched in 2006, and Alabama’s program — now widely seen as the model program other states have followed — began in 2009 as a premium discount and expanded to grants in 2016.

Initially concentrated in the Southeast hurricane belt, the model is spreading. Proven results, combined with the growing reach of extreme weather risks, have driven adoption in at least 12 states across the country, including in the Midwest and Northeast:

 

State programs’ economic track records are growing

As these programs have expanded, so too has the body of evidence that they are economically beneficial. Studies have found that households that invest in resilience upgrades are less likely to file insurance claims after major storms, and when they do, claims are materially smaller. One University of Alabama (UA) study after Hurricane Sally damaged the state in 2020 found that, if all of the houses in areas affected by the storm had been upgraded, it would have saved insurers over $111 million, or 75% of all storm claims paid. These investments can even carry additional economic co-benefits such as increased home value. Another UA study found that fortified home upgrades could increased home resale value by as much as 7%.

 

Four lessons from state programs to scale resilience finance

 

 Lesson 1: Start with a trusted engineering standard

 Most state home resilience programs reference the Insurance Institute for Business & Home Safety’s (IBHS) FORTIFIED standard. First published in 2010 and supported by rigorous lab testing and post-storm forensics, FORTIFIED codifies construction improvements — including stronger materials, water sealing, hardened windows and doors, and engineering improvements — that better protect against catastrophic storm damage. A measurable, trusted standard gives clear guidance to homeowners about what changes they can make, and gives insurers and states a common benchmark to determine eligibility for grants and discounts.

The power of such standards could apply to a range of resilience technologies and hazard scenarios and could be particularly beneficial if they also support greater adoption of resilience solutions. For example, IBHS released a new wildfire home preparedness standard in 2022. These standards can even align stakeholders around low-carbon and resilient energy solutions. RMI’s Solar Under Storm research, for example, codifies how to construct solar energy solutions to withstand severe weather risk. This approach can provide a win-win-win of risk reduction, cost savings, and emissions reduction.

Lesson 2: Make the math work for homeowners

 FORTIFIED upgrades can be a hard sell for many homeowners. They require significant up-front costs, and the payback can take years. In Louisiana, for example, adding FORTIFIED upgrades raises the cost of a new roof by 20%, pushing median cost above $16,000 per home.

Premium discounts alone rarely close the affordability gap for homeowners. Although several states require insurers to offer premium discounts, they are often modest — typically applied only to the weather-related portion of premiums — and usually fall far short of covering upgrade costs. Savings accrue slowly and the benefits can change with annual renewal cycles.

The most effective programs pair discounts with direct grants to reduce up-front costs. These grants, up to $10,000 in some states, can cover much of the upgrade expense. Notably, Alabama, North Carolina, and Louisiana — the three states with the largest grant programs — account for nearly 90% of the nation’s 90,000+ FORTIFIED homes —suggesting incentive size strongly influences adoption.

Importantly, these states show that scaling is not simply a question of writing bigger checks. Higher up-front investment can create outsized leverage and market growth. In Alabama and Louisiana, most FORTIFIED homeowners (80% and 60% respectively) did not receive grants, indicating that targeted early subsidies helped build market awareness and spur broader voluntary adoption.

Lesson 3: Pooling funds can help offset costs and maximize benefits

Given the meaningful size of the subsidy needed to catalyze resilience investment, access to financing is a key challenge. Most states structure and fund incentive programs in one of three ways (See Table 2):

In practice, state insurance regulators most often fund grant programs through fees or taxes collected directly from insurers. By pooling these fees into state-wide multi-million-dollar annual funds, states can align the interests for all stakeholders involved. States can provide generous incentives that improve affordability and cost-benefit economics for homeowners. Insurers, who would also find it prohibitively expensive to directly subsidize upgrades for individual policyholders, enjoy reduced portfolio risk (via reduced exposure to the most vulnerable and unprotected housing stock) while maintaining their license to operate.

By lowering risk for the highest-vulnerability homes, community-scale resilience improves. This type of incentive structure could be particularly advantageous for hazards, such as wildfires, that depend on house-to-house and community adoption of resilience solutions to reduce the risk and impact of extreme weather.

Lesson 4: Aligned incentives enable financial innovation

Risk reduction, cost-benefit incentives, and pay-back time are among the key factors that affect return on investment for resilience. When they align, resilience can scale through financial innovation. Residual insurers illustrate this dynamic well. Because they cover the highest-risk properties and bear significant losses, they have strong long-term incentives to reduce portfolio risk.

The North Carolina Insurance Underwriting Association (NCIUA), the state’s insurer of last resort for coastal properties, administers one of the largest FORTIFIED grant programs, allocating more than $100 million since 2019. The insurer reports value from both lower post-storm losses and reduced reinsurance purchases, with expected claims savings exceeding $72 million over the next decade.

That track record has enabled new financing approaches. In 2025, NCUIA issued a first-if-its-kind $600 million catastrophe bond, which will direct a portion of interest in no-loss years toward additional resilience grants. By linking capital markets access to demonstrated risk reduction and cost savings, the model opens a pathway to crowd in private investment and further scale resilience solutions.

Financing resilience via coordinated risk reduction

These examples and lessons demonstrate how strategic coordination across market participants, combined with analytical rigor and alignment of interests, can unlock resilience financing and adoption at scale.

State resilience incentive programs offer a glimpse of how aligning interests between state governments, insurers, and homeowners can unlock private investment, strengthen communities, and stabilize insurance markets in the face of growing social, economic, and environmental risks. For RMI, this is familiar territory. Just as our work scaling the clean energy transition requires aligning technology, markets, and policy signals, scaling resilience markets will require similar multi-stakeholder coordination. While the business case for resilience is increasingly clear, designing effective incentives is what will help turn evidence into action.

These lessons have never been more important. While many resilience technologies will pay for themselves many times over, annual financing for adaptation remains far short of what the market needs. Protecting current living standards in the face of global climate change would require 2.5–6 times current levels of financing. Without action, the costs will be even higher.

At RMI, our previous research has shown that power outages after extreme weather are costing more than previously thought, and we have road-tested effective multi-stakeholder grid resilience projects. Home resilience incentive programs are an exciting bright spot demonstrating how governments, communities, and financial institutions can and should work together to incentivize solutions, reduce risk, and increase access to capital for resilience.