Editor’s note: This article is the third installment in our Future of Risk series, which explores the rise of systemic risks — threats that are difficult to predict, span industries, and carry the potential for widespread disruption. This piece looks at climate volatility and property exposure, highlighting how land — once seen as a straightforward, stable asset — has become a complex investment requiring careful consideration in today’s evolving risk landscape.
Climate-driven property losses are no longer a surprise, but a more complex shift is underway. Extreme weather is turning once-prized land into stranded assets, leaving homeowners, developers, and communities with difficult decisions.
According to the National Oceanic and Atmospheric Administration (NOAA), the U.S. experienced 28 separate billion-dollar weather and climate disasters in 2024 — the most ever recorded in a single year. These events didn’t just impact structures. They reshaped the insurability, usability, and long-term value of entire properties, sometimes rendering the land unmarketable.
While rebuilding structures after extreme weather is still possible, what happens when the land itself becomes unbuildable or uninsurable? It’s no longer just about damage and claims. It’s about whether rebuilding makes sense at all.
When property protection stops at the ground
Historically, risk models have focused on replacing buildings. But now, the land they reside on is becoming a greater concern.
- In places like California’s Pacific Palisades, insured homeowners have walked away from high-value lots after total loss payouts — not because the homes were uninsurable, but because rebuilding on that land no longer made sense.
- Insurability maps are shifting rapidly. Locations once considered safe are now flagged as high-risk due to wildfire, flood, and wind exposure.
- Local building codes have become more demanding, requiring resilience upgrades that raise costs and may prevent rebuilds entirely.
Even when land is technically buildable, construction that meets modern resilience standards can cost two to four times more than traditional methods, putting serious financial pressure on property owners.
These changes challenge the traditional belief that land is a stable, long-term asset. As insurers reassess geographic exposure, brokers and property owners are being pushed to reevaluate how location affects value.
This evolution in thinking doesn’t just affect individual parcels — it’s triggering ripple effects across infrastructure, economics, and entire communities.
Infrastructure risks: The cascading effects of climate disasters
Climate events don’t happen in a vacuum. When disaster strikes, the impact extends well beyond the property line, and often far beyond the immediate event.
Roads, power grids, and clean water access may take weeks or months to restore. In some regions, like those affected by Vermont’s recent flooding, recovery has been slow or stalled due to displaced populations, material shortages, and underfunded infrastructure.
These challenges aren’t just about inconvenience. They undermine local economies by:
- Reducing municipal tax revenue as property values fall
- Delaying or halting rebuild efforts
- Forcing workforce relocations or reducing access to jobs and services
Businesses outside of disaster zones also feel pressure when disruptions hit suppliers, transportation networks, or labor pools. Damage to these foundational systems triggers a cascading effect across industries and geographies.
While commercial portfolios may have more tools to absorb these risks, through geographic diversification or retained risk strategies, individual property owners often face limited, costlier options. That reality is shifting how markets evaluate risk and make development decisions.
Parametric insurance: A new model for high-risk property coverage
As traditional carriers pull back from high-risk areas, new approaches are stepping in to address gaps in coverage, especially for complex or exposed properties. Parametric insurance is one option gaining traction.
What is parametric insurance?
Parametric insurance policies pay out when a specific trigger, like wind speed, wildfire proximity, or rainfall thresholds, is met, regardless of the actual loss incurred. This model offers:
- Fast, predictable payouts
- Less friction in claims handling
- A supplemental layer of protection in high-risk portfolios
Clear communication helps set expectations, since payouts hinge on trigger thresholds rather than damage assessments. If the event doesn’t meet the agreed threshold, the insurer doesn’t issue a payout.
AI-driven micro-risk modeling is transforming underwriting
Insurers are using AI-powered micro-modeling to underwrite risks at a more granular level. Instead of assessing broad geographic zones, they can now evaluate exposure down to the parcel. This approach enables:
- More precise risk selection
- Tailored pricing
- Fewer exceptions and less flexibility
Many traditional coverage options are shrinking, and carriers are becoming increasingly unwilling to insure specific risks. Just one major disaster could lead to further market retreat, limiting available options even more. In this tightening environment, anticipating exposure with data-backed insights can offer a strategic edge.
Together, these tools are reshaping the conversation around insurability. But they also signal a more rigid, data-driven marketplace that rewards preparation and penalizes assumptions.
Rethinking land value and risk strategy in a climate-driven market
Property owners and brokers alike are facing new expectations — and new opportunities to act before risk becomes reality.
How an expert insurance broker can help:
- Reevaluate client portfolios through the lens of geographic exposure, not just asset value.
- Translate modeling insights into clear guidance on shifting insurability and risk concentration.
- Introduce layered strategies to strengthen resilience, including parametric options, captives, and surplus lines.
- Flag potential exclusions or non-renewals before they catch clients off guard.
Many clients don’t realize what their policies exclude, or whether their coverage will still be available next year. Proactive conversations can uncover these risks before they become costly surprises.
For property owners and developers:
- Integrate climate and catastrophe data into early site selection and planning.
- Budget for systems that support resilience, such as raised mechanicals, backup power, and defensible space in wildfire zones.
- Reconsider whether land ownership still aligns with long-term financial and operational goals, especially when access, insurability, and resale value are at risk.
Increasingly, clients aren’t just asking whether a property is covered; they’re questioning whether it still makes sense to hold onto it at all. That shift in mindset underscores the need to view risk not as a policy detail but as a strategic decision point.
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About the author
Jeff Clinkscales, an insurance professional with more than 25 years in the industry, specializes in private client services, risk analysis, and high-value property protection. As a trusted advisor at Risk Strategies, he provides expert solutions for managing climate volatility and property exposure.
