It’s widely known that simple measures taken before climate fueled disasters can prevent human suffering and save enormously on the cost of rebuilding. But human nature is that people procrastinate—sometimes until it’s too late. Another problem is cost. Even if making buildings or infrastructure resilient saves money in the long term, it can be expensive in the near term. 

Gina Hardy is the CEO of two state-chartered nonprofit insurance companies in North Carolina. Combined, they insure hundreds of billions of dollars in property owned by more than half a million policyholders. Her companies—like many others—use catastrophe bonds, or cat bonds, to spread the risk of its insurance policies to the broader financial markets. But in the case of the companies Gina leads, the cat bonds can also make available funds that ultimately allow the payment of up to $10,000 each to insured homeowners if they install a roof specially reinforced to withstand the strong storms and high winds that increasingly threaten houses in North Carolina. 

I sat down with Gina to understand how an innovatively-structured catastrophe bond could allow an insurance company to pay so much for resilience without a government subsidy. I wanted to learn how financial provisions in bond transactions in the hundreds of millions of dollars could pay to strengthen homes of individual families. And I wanted to know what Gina and her colleagues learned about the practical challenges of designing and implementing a first of its kind program like this one.  

Resources referenced in this episode:

• NCIUA (Coastal Property Insurance Pool) and NCJUA (FAIR Plan)
• Insurance Institute for Building & Home Safety
• University of Alabama Center for Risk and Insurance Research