Insurers are warning that cities worldwide face growing protection gaps and increasing insurance costs as climate risks escalate faster than resilience investment.
A new report from the Resilient Cities Network and Tokio Marine Group found that without structural changes in how resilience is financed, many urban areas risk becoming uninsurable, leading to capital flight and long-term economic decline.
The report, Under Pressure, Overdue: The Portfolio Approach and Financing Cities for Resilience, outlined how rising losses from extreme weather are driving up premiums and shrinking the availability of affordable coverage. In several regions, property insurance has become difficult or uneconomic to obtain, leaving local governments and households exposed.
The study pointed out that the widening protection gap — the difference between total climate-related losses and what insurers cover — is undermining cities’ ability to recover from disasters. As climate shocks increase in frequency and intensity, insurers are becoming more selective about the risks they underwrite, while pricing reflects both the physical and transition risks facing cities.
In the US, Broward County, Florida, saw flood insurance premiums surge by more than 400%, prompting local officials to demonstrate that flood defense investments could deliver measurable economic returns. By proving the cost-effectiveness of prevention, the county attracted business support and began securing alternative funding mechanisms. According to the report, this example shows how risk modelling and insurance data can guide capital allocation and reduce long-term exposure.
In South Africa, Cape Town's integration of resilience into city governance has strengthened its insurability and credit standing. Transparent reporting, audit-based governance, and continuous risk assessments helped secure international financing, a model that links resilience planning directly with insurance market confidence.
Meanwhile, Canada's Municipal Fund (GMF) offers another template. By de-risking projects through grants and loans, the fund has mobilised CA$1.6 billion across more than 2,300 projects, drawing in CA$75 million in private capital. The report noted that similar models can help insurers and reinsurers identify stable, investable resilience portfolios aligned with sustainability targets.
Tokio Marine Group CEO Brad Irick said the industry’s role must extend beyond claims payouts to proactive risk partnership.
By collaborating with cities from the outset, insurers can help quantify exposure, guide investment, and stabilise pricing over time. This early engagement enables insurance to act as both a financial safeguard and an enabler of development, the report suggested.
For insurers, the implications are that resilience must be priced into long-term strategies. Cities that fail to invest in adaptive infrastructure face declining insurability, potentially leading to market withdrawals or higher capital requirements for insurers.
Meanwhile, those that take a portfolio approach, meaning they combine holistic planning, transparent governance and measurable outcomes, are more likely to retain insurance capacity and attract new investment.
The findings come ahead of COP30 in Belém, where global climate finance negotiations will test how governments and private sectors align capital with adaptation needs. Insurers are increasingly seen as critical actors in that equation, bridging data, finance, and risk transfer.
