Wider climate-resilience measures like drainage and coastal defences should factor into insurance pricing and capital decisions, according to a new Marsh and World Economic Forum report.

The report, Addressing Insurability: A Playbook for Investing in Place-Based Resilience, says availability and affordability of insurance is depending more and more on the resilience of a whole community, rather than just individual property owners.

That proposition is relevant to Bermuda’s international market, which brings together catastrophe underwriters, reinsurers, brokers, insurance-linked securities investors and risk-modellers.

Bermuda insurers’ exposure to major disasters, including hurricanes and earthquakes, rose 7.5 per cent to nearly $220 billion in 2024, according to the Bermuda Monetary Authority. The single largest source of that exposure is Atlantic hurricanes.

“Insurers and the wider insurance community have a major role in translating place-based resilience into financial signals,” the report said.

It added: “Insurers, reinsurers, brokers and modellers can help ensure that local resilience conditions are better reflected in underwriting, pricing and new forms of risk transfer.”

The report was released yesterday by Marsh, the professional services firm, in collaboration with the World Economic Forum during New York Climate Week.

It focuses on measures such as stronger drainage systems, coastal defences, better-managed natural buffers and more resilient infrastructure. Such improvements can reduce damage caused by storms and flooding, but their benefits are shared among property owners, governments, lenders, insurers and communities.

That can make them difficult to finance. The party paying for an upgrade may not be the one getting the main financial benefit, while the risk reduction may not be reflected in insurance premiums, coverage or property values.

The playbook proposes four areas for action: stronger and more widely shared risk data; financing structures that pool resources; common metrics that insurers and investors can both use; and incentives.

For the market, the question is whether better evidence can show that resilience measures reduce expected losses enough to affect the terms on which risk is re/insured.

The report cautioned that this will require more detailed data. “Reinsurers typically have less granular data but may want to consider how they can incorporate resilience into pricing and risk,” it said.

Separately, the BMA is progressing a proposed parametric special purpose insurer class, for fully collateralised parametric re/insurance transactions.

This kind of cover pays when a pre-agreed event threshold is met, rather than after a conventional loss-adjustment process, and can provide rapid funds following a disaster.

Marsh and the WEF said insurance should not be viewed as a substitute for reducing risk.

“Insurability is a downstream consequence of the increase in underlying risk — addressing it requires improved risk management in places,” the report said.

The report’s authors argue that the next challenge for insurers and investors is to make sure that risk-reduction measures can be measured, recognised and financed before the next catastrophe happens.