Resilience Projects Cut Insurance Costs but Face Scaling Challenges
Resilience work can improve insurance terms, but the gains are clearest when projects produce risk reductions insurers can measure. A California wildfire program cut premiums by 39% and deductibles by 84%, offering a concrete example of mitigation being reflected in coverage. Elsewhere, data center developers face delays tied to pressure on local power and water systems, a reminder that a well-protected building can still depend on vulnerable infrastructure beyond its site. The two cases point to the same commercial question: can resilience work be linked to a reduction in risk that insurers, businesses and communities can recognize?
Community resilience and data center development
Data centers are built to withstand catastrophes because even brief outages can cause significant losses. Yet facility-level protections may leave operators exposed to weaknesses in surrounding power, water and other infrastructure, said Michael Donatti, a San Francisco-based principal at Oliver Wyman. A building can have its own safeguards and still depend on local systems that it doesn't control. That gap matters when assessing continuity: resilience at the site and resilience in the surrounding community aren't the same thing.
Local opposition delayed or blocked projects valued at about $130 billion in the first quarter and another $68 billion in the second, according to Data Center Watch. Concerns over power and water use, noise and other local effects can complicate permitting and threaten a facility’s ability to operate over time. The reported values show the scale of projects affected, but they don't by themselves explain the reasons for each delay or establish how much any single concern contributed. Still, the pattern points to a business risk developers can't assess solely by looking at a site boundary.
“There needs to be a shift from developers coming in and viewing community opposition, energy and connection to the power grid, and water challenges as a risk to manage, and really becoming investors in the resilience of a place,” Mr. Donatti said. The proposal recasts local infrastructure and community relations as part of project planning, rather than as issues to address only after resistance emerges. That can mean considering how a facility's demands fit with the systems and communities around it. And this is the part most people overlook: local support and infrastructure capacity can affect whether a technically sound project can proceed and keep operating.
That shift would make local infrastructure part of the resilience calculation, rather than treating it as separate from the asset. For developers, the stakes include both project timelines and the reliability of the systems their operations depend on. If you're working in this space, the practical question is whether investment in shared resilience can be identified, funded and maintained over time. A pledge alone doesn't establish that a community's exposure has fallen.
Wildfire measures show measurable insurance effects
A program developed by The Nature Conservancy, the Tahoe Donner community and other organizations sought to quantify how forest management around the community affected wildfire risk. The work produced a 39% premium reduction and an 84% reduction in deductibles, said Deborah Glaser, the conservation organization’s Los Angeles-based project director for disaster resilience. Those are material changes to insurance terms, and they give the program a concrete result to point to. The figures also make the case easier to discuss with insurers than a general claim that better land management should improve safety.
But a result in one community doesn't establish that the same measures will produce the same insurance outcome elsewhere. The effect of mitigation depends on the risks being addressed and on whether the relevant measures can be assessed in a way insurers accept. This is more significant than it looks: the example connects work on the ground to a change in the cost and structure of coverage, while leaving the challenge of applying that approach at greater scale.
“We’ve shown that underwriters are willing to incorporate this into the models, and insurers are willing to price against that,” Ms. Glaser said. “So that’s where we are now: thinking about scale.” Her point is that recognition by underwriters is an early step, not proof that every community can reproduce the outcome. To expand the approach, stakeholders need ways to describe the work, assess the resulting risk and show how the benefit holds up across different places.
Other efforts around Lake Tahoe link forest management outside communities with vegetation reduction within neighborhoods and home-level protections, said Amy Berry, CEO of the Tahoe Fund. Six pilot projects are underway in the region. Technology helps identify which measures are likely to reduce risk most effectively, she said, in place of what she called “random acts of mitigation.” The approach links measures at several scales, since work in the surrounding forest, the neighborhood and an individual property can address different parts of the same risk. The test will be whether those projects can show results that are clear enough to guide further work.
Financing and measurement remain hurdles
Scaling such work depends in part on whether catastrophe models account for resilience measures. Panelists said gaps in modeling make it harder for insurers and reinsurers to quantify risk reductions and reflect them in coverage or pricing. Without a way to assess the effect, a project may have value to a community while remaining difficult to translate into an insurance decision. That's a measurement problem as much as a funding problem: the parties need evidence they can use to compare costs, risks and potential benefits.
Property owners can also help fund projects that reduce risks beyond individual sites, said Amy Barnes, London-based head of energy and power and head of climate and sustainability strategy for Marsh Risk. A business with substantial exposure to river flooding, for example, could anchor financing and bring in other companies and organizations that would benefit. That structure recognizes that protective work can benefit more than the organization paying for it, though it also raises practical questions about how costs and benefits are shared. Coastal protection, she said, will likely continue to rely more heavily on government funding.
“There isn’t enough money in the public sector to fund all the adaptation measures that we need,” Ms. Barnes said. Businesses also need to make the economic case for resilience by accounting for avoided business interruption and disruption to communities and supply chains. That broadens the calculation beyond damage to a single property: a disruption can affect operations and the links that keep them running. Yet estimates of avoided loss depend on assumptions about what might have happened without the project, so clear methods matter.
The Marsh-sponsored panel took place Wednesday during Climate Week NYC, alongside the launch of a climate resilience and insurability playbook by Marsh and the World Economic Forum. It sets out ways for insurers, asset owners, governments and other organizations to share risk data, finance projects and develop common measures of their benefits. The next test is whether those methods can turn local results into projects insurers can price and communities can sustain. A playbook can set out a process; the evidence will come from whether participants can apply it consistently and show what changed.
What scale will require
The examples point to a common constraint: resilience has to be legible to the people expected to fund it. For wildfire work, that means connecting forest and property measures to risk assessments and insurance terms. For data centers, it means treating local power, water and community conditions as part of operational continuity. The details differ, but the underlying challenge is similar.
That said, measurement won't settle every question. Projects can take time, benefits may extend across property lines, and the parties paying for protection may not be the only ones who gain. The figures from the California program show that insurance terms can change when risk reductions are recognized; they don't establish a universal formula. The work ahead is practical. Define the exposure, identify measures that address it, and determine whether the result can be sustained.