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Why is Risk Rising

The Growing Threats Facing the Insurance & Risk Markets

The world is changing, and so are the risks we face. Traditional insurance markets are under pressure from rising catastrophe losses, economic volatility, and emerging risks like cyberattacks. With climate change accelerating disasters, insurers withdrawing from high-risk areas, and reinsurance costs soaring, new solutions are needed to manage risk effectively.

Climate Change is Driving More Frequent and Severe Disasters

Extreme weather events are becoming more frequent and destructive. According to the World Meteorological Organization, weather-related disasters have increased fivefold over the past 50 years​.

Hurricane Ian Image

Stronger Storms

Warmer ocean temperatures fuel more intense hurricanes that are stronger and wetter.

More Wildfires

Drier conditions make fires more frequent and severe, extending wildfire seasons.

Rising Sea Levels

Coastal flooding is increasing, putting millions of homes at risk.

Weather-related disasters have increased fivefold over the past 50 years. In 2022, Hurricane Ian caused $112 billion in damages, leading to multiple insurance company bankruptcies.

Insurance Coverage Is Becoming Less Affordable & Accessible

Premiums Soaring

With disasters increasing, insurance companies are raising premiums dramatically.

Market Withdrawal

Major insurers like State Farm and Allstate have stopped offering new homeowners policies in California.

Forced Alternatives

Homeowners are being forced into state-run insurance pools with higher costs.

If traditional insurers continue withdrawing, entire regions may become "uninsurable", leaving governments to step in with costly disaster relief programs.

Reinsurance Costs Are Surging, Increasing Financial Pressure

Reinsurers—who provide insurance for insurance companies—are increasing their prices due to mounting catastrophe losses​. This cost is passed down to insurers, who then raise premiums or restrict coverage.

Rising Costs

Reinsurance prices rose by 30-50% in high-risk regions in 2023.

Market Fragility

Rising reinsurance costs create a "risk spiral" making the entire system more fragile.

Reduced Coverage

Insurers are reducing coverage limits to cut costs, leaving policyholders exposed.

Premium Increases

Higher costs are passed to consumers, making insurance less affordable.

Real-World Example: After Hurricane Ian, reinsurance rates in Florida skyrocketed, forcing smaller insurers to fold or drastically increase premiums.

Emerging Risks: Cyberattacks, Pandemics & Liability Shift

The 2021 Colonial Pipeline cyberattack led to fuel shortages and billions in economic losses, resulting in higher premiums and stricter policy exclusions.

The Need for Alternative Risk Solutions

Catastrophic Bonds

Provide faster payouts for disasters

Parametric Insurance

Offers automatic payouts based on real-time data.

Risk Transfer Markets

Allow insurers to offload extreme risks to investors.

The Future of Cat Bonds

As climate change accelerates, cat bonds are becoming a critical tool for financial resilience. They allow insurers, governments, and businesses to stay ahead of risk, ensuring economic stability in a world where disasters are no longer rare events but regular occurrences.

Recognizing the growing need for broader access to catastrophe bonds, Brookmont Capital has launched the first-ever Cat Bond ETF, making it easier for investors to participate in this essential market. By bringing liquidity and accessibility to cat bond investing, Brookmont is helping to expand the pool of capital available for disaster recovery while offering investors an opportunity to diversify into an asset class uncorrelated with traditional markets.