How can we future-proof homes against environmental risks?

Nearly every year, the rising human and economic toll of natural hazards in the U.S. sets new records. 

Documented in the Spatial Hazard Events and Losses Database for the United States, there is only one trend in these losses — upward. Society pays enormous sums to rebuild after each disaster, often baking in the same vulnerabilities during the recovery process as before. Far too little is invested in making homes more resilient for the next hurricane, the next tornado, the next wildfire or the next heat wave. 

A team of researchers across Arizona State University, along with colleagues from Louisiana State University, have been selected for the AXA and Swiss Re Joint Risk Resilience Partnership Award to find practical solutions for these issues.

The partnership aims to support top-tier risk research that finds smarter ways to increase community resilience, disaster preparedness and building back better after a disaster. 

The 18-month project, Insuring for Resilience: Strengthening Disaster Preparedness and Post Catastrophe Reconstruction, will examine how insurance incentives and government cost-sharing — such as subsidies, tax credits and premium discounts — can encourage resilience-enhancing construction to reduce wind disaster risk. 

Using a region-specific computable general equilibrium model, it analyzes impacts on insurance uptake, safer building investments, economic performance and insurers’ financial stability. The goal is to deliver evidence-based policy recommendations that support resilient housing, faster recovery and sustainable risk sharing across the economy.

The team includes:

• Principal investigator Melanie Gall, a hazards geographer and associate professor who co-directs the Center for Emergency Management and Homeland Security at Arizona State University's School of Public Affairs. She manages the hazard loss data and the disaster resilience policy framing.
• Co-principal investigator Petar Jevtic is an associate professor of actuarial science at the School of Mathematical and Statistical Sciences in The College of Liberal Arts and Sciences. He leads the CGE (computable general equilibrium) model design, calibration and scenario simulation.
• Carol Friedland serves as co-principal investigator. She is a professor and civil engineer at the Louisiana State University AgCenter, where she directs the LaHouse Research and Education Center.

"We want to thank the foundations of AXA and Swiss Re for creating a program that does something unusual and valuable," Gall said. "It invites academics and the insurance industry to solve a problem together rather than from opposite sides of the table. We also feel tremendous excitement about what this award represents. Only one team annually in the world receives it, and being chosen as that single team is a rare privilege. It is a thrilling opportunity, and one we feel genuinely fortunate to take on."

Here, Gall and Jevtic jointly share more details about the project.

Note: Answers have been edited for length and clarity.

Question: Tell us about the project.

Answer: We are building an economic model of Louisiana, based on a computable general equilibrium (CGE) methodology, that treats insurers, homebuilders, households and government as one connected system. 

The question we are answering is this: What combination of insurance premium discounts, government subsidies and tax credits most effectively incentivizes homeowners to retrofit and harden their houses against windstorms, without bankrupting insurers or the public purse? 

When a home is strengthened, it generates fewer claims after a storm, residents and communities recover faster, and the wider economy and society benefit from fewer external shocks. Our model lets us simulate policy combinations and identify which ones may be preferable for different stakeholders than others.

Q: How did you come up with the idea for the project? 

A: Disaster losses continue to rise. A lot of that is related to the disconnect between who builds a home and who lives in the home. Developers and builders are less interested in hazard-resilient construction than are the actual inhabitants of the home or even the community. Most people are unaware of what hazard-resilient construction actually means or the policy options a community has available to require safer homes. A “cheap” or “affordable” home now may not be so “cheap” or “affordable” in the long run when you factor in future reconstruction costs, the mental anguish when you are displaced or lose cherished memorabilia.

However, the majority of the housing stock has been built to outdated and minimum standard building codes. We are not talking about building codes related to fire safety but building codes prescribing how high off the ground a home should be built to avoid future floods or how strong a roof should be to withstand winds from storms. Builders are less interested in these “invisible” safety features because home buyers are conditioned to value square footage, granite countertops and so on. Safer homes and access to insurance are critical going forward to curb the impacts and costs of disasters.

(Gall and Friedland), along with a large research team, have developed hazardaware.org, an online platform seeking to educate the public about local risks to residential property and the risk future homeowners may take on living in a certain home and/or location. The platform includes a “mitigation calculator” that computes how long it takes for risk reduction measures to amortize. This current project relates to that work. 

Q: Why did you choose wind disaster risk?

A: We chose wind because it is where the problem is most acute right now. Hurricane and windstorm losses are escalating, and insurers in states like Louisiana and Florida are wavering, leaving homeowners exposed. Wind damage is also unusually well suited to our approach, because the engineering link between specific retrofits, such as reinforced materials, stronger roof connections, and better building techniques — and the losses they avoid — is well established and can be quantified.

The issue is not confined to wind hazards. Similar issues around insurance affordability and accessibility are prevalent in California or Colorado due to wildfire risk.

Q: What geographic region will you be studying and why was it selected?

A: Louisiana. It is one of the most wind-exposed states in the country and has suffered repeated catastrophic hurricanes. Today, the state sits at the center of the insurance availability crisis, with insurers leaving, premiums spiking and homeowners struggling to stay covered. Having increasing numbers of residents forego homeowner’s insurance is a nightmare scenario as it eliminates the main financial source for disaster recovery. 

Federal disaster assistance tends to focus on the public sector and public infrastructure only. Disaster survivors are never made whole by federal aid. That’s a myth. Even those with insurance are often underinsured. Maintaining insurance coverage, be it public, private or a combination thereof, is essential to ensure that communities and their residents can recover from a disaster.

Q: Are there any future plans to apply your findings to Arizona or the southwestern region of the U.S.?

A: Yes. The framework is deliberately portable. It is built so that you can swap in any region's local economic data and adapt the policy levers to that region's hazards and “risk appetite.” Arizona and the Southwest face their own escalating perils, particularly wildfire and extreme heat. The same core question applies: How do you structure insurance and public incentives to drive resilient construction cost effectively? Once the Louisiana wind model is validated, adapting it to Southwestern hazards is a natural next step, and one that is directly relevant to our home state. 

Q: What kind of recommendations do you hope to deliver to policymakers?

A: Concrete, evidence-based guidance on which policy mixes are available and their associated costs. What are the economic effects of a premium discount or tax credit to incentivize home hardening, and which combinations deliver the most resilience per public dollar? We are exploring public-private partnerships that keep insurers in the market and profitable while keeping insurance accessible to and protective of households, especially vulnerable ones.

Q: How will this project benefit the public?

A: There are longstanding discussions around the benefits and shortcomings of hazard-specific insurance and the design of such insurance programs, both in the public and private sectors. Decades of the National Flood Insurance Program, a federal insurance program for flood risks, has generated ample data on the pitfalls of a public insurance program.

After decades of development in high-risk zones and development allowed under poor or lax building codes and code enforcement, private insurers are becoming increasingly unwilling to take on that risk. Residents are left paying the price in more ways than one.

Insurance accessibility and affordability can only be achieved when everyone, i.e., homeowners, neighbors and the community at large commit to risk reduction. We have to break the costly cycle of rebuilding that drains household savings, public budgets, and insurer reserves with every storm. 

Retrofitting homes means fewer destroyed homes, faster recovery, more stable and available insurance, and lower disaster costs borne by taxpayers. This is particularly important for vulnerable households, who are hit hardest and have the least financial cushion.