How AI can close the climate resilience gap

• Key insight: Uncover how insurers plan to translate climate-related property risk data into actual infrastructure funding.
• Forward look: Five approaches to attract institutional and private-sector capital.

As extreme weather continues to reshape the insurance industry, carriers may face the reality that there is not enough funding into the infrastructure or mitigation projects needed to make communities more resilient. 
According to a report from the Milken Institute and Marsh, extreme weather events in underinsured or unprepared communities remains a challenge for insurance.

"Extreme weather is reshaping the risk landscape, and resilience can no longer be viewed as optional or a cost to be avoided," said Nick Studer, CEO of Marsh Risk, in a press release. "At Marsh, we believe the future depends on smarter collaboration between the public and private sectors to mobilize capital, strengthen communities and reduce losses before disaster strikes. We're proud to work with the Milken Institute on a report that offers actionable solutions to help future-proof American communities in the face of growing climate risk."

Marsh and the Milken Institute outlines five approaches to attract institutional and private-sector capital: a stakeholder-driven community plan, a private-sector-led revolving load fund, district-backed resilience bonds, a resilience innovation technology fund and a policy playbook of best practices.

While the report shares that insurers possess detailed information about climate-related property risk, that information has not yet been consistently translated into investment in resilience. According to the report, AI tools and technology could change that.

"Resilience is an investment in our communities and our future, and the evidence shows that resilience pays for itself. IBHS FORTIFIED roof designations, for instance, started with a state-enabled grant program and today in Alabama, 80% of FORTIFIED roof homeowners installed roofs without relying on state financial help, recognizing the return on investment. The program has now expanded to 34 states," said Caitlin MacLean, managing director of catalytic capital at Milken Institute, in the press release. "This report gives investors, insurers and communities solutions to move capital where it's needed before the next disaster strikes, not after."

AI can analyze large amounts of property, claims and weather data to identify concentrations of risk and help estimate how specific mitigation measures could affect future losses. Data and predictive models could help communities prioritize projects such as hardened roofs, flood mitigation, wildfire defenses or infrastructure upgrades — while also providing investors with better information about the potential financial return.

One example of investment into AI-powered resilience innovation is how a company like Pano AI, highlighted in the report, is deploying AI surveillance to detect fire risk from unmanaged vegetation. Previous Digital Insurance coverage has also found that AI investment for property detection is growing, as found in LexisNexis research: carriers are using AI to better understand by-peril and macro-level trends through more granular property intelligence and technology. AI models that use visual language are also improving digital self-inspection tools for evaluating home preparedness and risk-hardening measures. 

Introductory bullet points created by AI with editorial review.