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New framework translates resilience investments into recognized risk reduction and insurance benefits

Extreme weather is becoming more frequent and severe. While there are clear actions that can help manage these risks, insurers have lacked a consistent mechanism to recognize and reward verified climate risk reduction measures.

08/14/2026 · 5 minute read

Extreme weather is becoming more frequent and severe. While there are clear actions that can help manage these risks, insurers have lacked a consistent mechanism to recognize and reward verified climate risk reduction measures.

As a result, it has been difficult to build a clear financial case for resilience upgrades, especially when they compete with so many other capital priorities.

To better acknowledge and reward actions that reduce future losses, Marsh and Carlyle have developed and are now applying the Investing in Resilience Framework, an insurance-centric incentive system designed to translate resilience investments into recognized risk reduction and potential insurance benefits.

Problems with existing models and frameworks

There is no shortage of models and frameworks in the market, but none fully address the incentive problem. For some investors, models have amounted to little more than “red flags, don’t invest there” messages — useful for flagging risk, but not much more. Traditional catastrophe modeling has also historically relied heavily on past weather patterns, and even where risk reduction can be measured, there has been no widely accepted underwriting structure to translate lower average annual loss into clear insurance benefits.

Several frameworks already exist to improve physical risk assessment and resilience planning. For example, PCRAM 2.0 integrates physical climate risk appraisal into investment decision-making, RELi is a resilience-oriented building and community rating framework, and ISO 22301 sets requirements for business continuity management and operational resilience. Yet the market still lacks a consistent way to turn these insights into clear incentives.

Insurers need high-quality, consistent data on the assets they underwrite; asset owners need clarity on what information will be recognized, and both sides need a common language for assessing the impact of resilience measures. Without that, it can be difficult for risk managers to build a clear financial case for resilience upgrades in the boardroom, amid many other capital priorities.

Short-term insurance cycles can also discourage long-term resilience investment

This issue is compounded by the mismatch between the long-term horizon of resilience investments and the annual renewal cycle of insurance policies. Resilience measures are often designed to deliver benefits over many years or even decades, while insurance coverage is typically reviewed each year.

As a result, an insurer may recognize that a resilience investment will reduce losses over time, but be reluctant to provide meaningful upfront incentives if the policyholder can switch to another insurer at renewal. In effect, the insurer funding the incentive may not be the one that ultimately benefits from the improved risk profile. This dynamic can limit insurers’ willingness to reward resilience investments, even when the resulting risk reduction is credible and measurable. The outcome is that many businesses continue to underinvest in controls and infrastructure that could protect value and strengthen long-term asset performance.

Getting everyone on the same page

The Marsh Carlyle insurance-centric Investing in Resilience Framework provides a disciplined mechanism to address these challenges and misalignment. It is built around a four-step, repeatable end-to-end process in which each stage informs the next, and the results are fed back into future decisions.

The framework begins with forward-looking hazard and loss modeling at the asset level. It then assesses vulnerability and resilience gaps against recognized standards before documenting resilience investments and the resulting reductions in average annual loss. Finally, it provides a structured way to translate verified risk reduction into potential insurance pricing, terms, and coverage considerations (see below).

Framework architecture: The resilience incentive loop

  • Forward-looking physical risk scenario analysis
  • Hazard modeling for flood, wind, wildfire, heat, and other perils
  • Asset-specific damage and loss curves
  • Average Annual Loss (AAL) and Probable Maximum Loss (PML) estimates
  • Business interruption analysis
  • Preference for vendors aligned with CMIP intercomparison protocols

  • Existing structural and operational controls inventory
  • Suggested alignment with ASTM E3429 Property Resilience Assessment
  • Flood barriers, drainage, wind resistance evaluation
  • Operational continuity, maintenance, and emergency protocols
  • Backup systems and redundancy mapping
  • Identifies both strengths and remaining resilience gaps

  • Targeted asset hardening and design modifications
  • Operational resilience enhancements and recovery acceleration
  • Suggested alignment with FORTIFIED Commercial and ASCE 7, ASCE 24
  • Evidence of implementation and effectiveness sufficient to support underwriting review
  • Quantified post-mitigation ΔAAL and downtime reductions
  • Ongoing maintenance and documentation expectations where appropriate

  • Potential pricing incentive credits linked to documented risk reduction
  • Deductible reductions and multi-year policy stability
  • Enhanced coverage terms and broadened business interruption protection
  • Parametric overlays and deductible wrap products
  • Faster post-event liquidity solutions
  • Translation of AAL/PML into actions benefiting policyholders

  • Lower expected losses
  • Improved risk transfer options
  • Better cash flow
  • Potentially stronger asset value

By establishing a standardized resilience-insurance operating model, the framework has the potential to generate meaningful outcomes for stakeholders across the financial system. At the market level, it could expand risk transfer options for climate-exposed assets, help reduce volatility in insurance markets, narrow the protection gap, and support the resilience of lending and financing ecosystems. At the asset level, it could lower long-term economic losses, strengthen asset value and durability, improve business continuity, and create stronger incentives for private-sector investment in resilience.

Reaction to the framework

The framework is resonating strongly with clients, with growing momentum among both clients and insurers eager to adopt it. Marsh specialists are already incorporating it into renewal conversations, helping insurers recalibrate their tools and models, and strengthening clients’ ability to demonstrate risk improvements to the market.

That positive reaction matters because it points to a wider shift in how resilience is being understood. Ultimately, the aim is to reshape how businesses think about resilience. Adaptation should not be seen simply as a defensive cost, but as a strategic investment that can help protect operations, preserve or improve asset value, maintain insurability, and support long-term access to capital. When that value is reflected in insurance pricing and financing terms, the business case for investment becomes far stronger.

This standardized approach has significant promise and represents an important step toward a future where risk analysis, resilience assessment, investment, and insurance decision-making are aligned to drive smarter choices and more resilient outcomes.

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Our people

Amy Barnes

Energy & Power, Climate & Sustainability Strategy Head, Marsh Risk

  • United Kingdom

Alexander Ackermann

PEMA North America Practice Leader, Marsh Risk

  • United States

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