Connecticut Should Use Insurance Fees to Fund Risk Reduction

To fund a comprehensive home risk reduction grant program, Connecticut should look to its highly profitable insurance industry.

Connecticut faces a fast-growing home insurance affordability crisis driven by climate change. The state needs to act now to protect homes and household budgets by lowering the risk, both by building physical resilience and addressing the root cause: fossil fuels. While proven solutions can lower costs by building resilience and clean energy, many households need upfront financial support. Connecticut should build a comprehensive home risk reduction grant program, funded by the highly profitable insurance industry, which had $1.2 trillion left over last year after paying claims. By prioritizing direct support for the most vulnerable households, Connecticut can take a proactive approach to keep communities insurable.

Climate change is driving an affordability crisis. Connecticut households are paying the price.

• Insurance costs are rising nationwide, far outpacing inflation and income. Public Citizen published a set of interactive maps showing these trends at a state and community level. Costs are rising fastest in climate-vulnerable areas exposed to wind and flood damage and, with dense coastal development and growing inland risks, Connecticut is particularly vulnerable. 
• Premiums in Connecticut jumped nearly 10% in 2023 and 13% again in 2024, a dramatic jump from past annual increases. Insurance in Connecticut now costs an average of $2,600 a year, on top of an average annual cost of $1590 for separate flood insurance. 
• Connecticut households are increasingly at risk of losing insurance entirely. Connecticut is in the top ten states for dropped policies and, in 2023, over 14,000 Connecticut households lost insurance, a 45% increase in one year.

Connecticut needs action now and a long-term plan to lower costs.

• Insurance is fundamental to the public interest. Without intervention, low-income households will be priced out of insurance and their homes. The state already faces tens of billions of dollars in costs from climate-driven disasters. As insurance companies retreat, vulnerable towns will struggle with a dwindling tax base that puts resilience out of reach.
• As a historically insurance-centered state facing high climate risk, Connecticut should lead in keeping coverage affordable and should not wait for the federal government to fund it. Connecticut should look to innovative sources for near-term investments, where even modest investments made early can pay off, with every $1 spent on resilience saves $13 in economic impact, damage, and cleanup costs later on.
• Connecticut cannot wait for the private market to craft a plan. Despite its sophisticated analysis of current risks, the private insurance industry has no credible, long-term plan to address climate-driven losses, other than raising premiums and retreating. Insurance companies simply do not expect to pay the price of climate change themselves, and a narrow focus on short-term profits and investments disincentivizes loss reduction.

Proven resilience programs lower losses but the state must scale them. 

• Decades of engineering research show that specific building upgrades, including fortified roofs, flood mitigation, natural habitats and home hardening for wildfires, lower losses. With sufficient oversight of insurance rates, lower losses mean lower premiums.
• Grant programs in 10 states show that targeting vulnerable homes for upgrades lowers losses and expands adoption beyond initial recipients. For example, in Alabama, homes retrofitted to the Fortified standard had 55–74% fewer insurance claims than conventional homes in the storm’s path during Hurricane Sally.
• Most households understand the risks and want to act, but many do not have sufficient savings upfront, even with the promise of a discounted premium over time. This is particularly true for communities of color harmed by decades of redlining and disinvestment, who also face disproportionate climate risk. The question now is how to scale and fund existing models with a predictable, funding stream that can meet demand. 
• The pilot program as outlined by Connecticut’s Severe Weather Mitigation & Resiliency Advisory Council is a step in the right direction. However, to scale this, the existing plan is missing two crucial pieces: carbon emissions reduction and sufficient funding.

A comprehensive risk reduction grant program should reduce carbon emissions while building resilience.

• While increasing the physical resilience of homes can lower costs, it is only part of the equation. With $30 billion a year on average of insured losses now attributed to climate change, any solution requires lowering the curve on carbon emissions.

• Currently, the Council recommends strengthening partnerships with Energize CT, but Connecticut should go further and expand grant funding to home-level energy efficiency and emissions reduction home upgrades. 
• A comprehensive approach can start stronger and reach further, by using existing agency expertise and overlapping contractor and outreach networks. By extending the program to energy efficiency and clean energy, the state can also reach a broader swath of homeowners by, for example, installing fortified roofs in areas most vulnerable to wind while installing solar in inland areas with lower risk.

Connecticut should require the insurance industry to invest in loss reduction now.

• Connecticut should look first to the industry that stands to benefit the most, the insurance industry itself. The state has the authority to raise industry fees and surcharges now. States that already use industry funding include Alabama, Oklahoma, North Carolina and Maine. 

• There is significant room to increase industry fees. The industry reached record profits and had $1.2 trillion left over after paying claims last year. This was driven by premium increases and investment gains, according to the National Association of Insurance Commissioners. Despite a looming crisis, the insurance industry also has more money than it can spend responsibly in a crisis, as evidenced by skyrocketing CEO pay, stock buyback spending sprees, billions blown on advertising wars and half a trillion dollars in reckless investments in fossil fuel projects.

• The legislature should expect a financial commitment now from its lucrative industry, when it can be meaningfully invested in loss reduction. The short-term nature of property insurance contracts means the industry has made no obligation to serve the state and vulnerable policyholders later on.
• Because insurers are not solely responsible, Connecticut could incentivize cost recovery from fossil fuel companies via a commercial policy surcharge and subrogation.

• While companies are required to set aside funds to meet capital requirements for claims and solvency, this is no longer sufficient. In the era of exponentially increasing climate-driven losses, a proactive approach is also essential to bring down the curve.

Grants should go to the most vulnerable and should be paired with additional tools.

• Full grants should be targeted to those most in need, with additional support for any evaluation fees. This should include affordable housing providers who are particularly at risk of losing insurance. To expand to homes with higher incomes, the state should provide matching grants and tax credits. 
• To target grants effectively and track the impact, the state should publish annual data on insurance premiums and claims at a census tract level and closely monitor insurance rates. 
• To ensure policyholders receive the full discount for all taxpayer-funded investments in resilience and clean energy, Connecticut should also require pricing and underwriting models to account for mitigation investments. 
• Community-level investments in resilience and clean energy provide even greater impact than home-level investments, and grants should be part of a larger approach to state and community-level upgrades. 

Connecticut’s insurance affordability crisis is not inevitable. By investing in resilience and emissions reduction, targeting support to vulnerable households, and securing sustainable funding, the state can stabilize insurance markets and protect residents from rising climate risks.