In an era defined by the rapid intensification of climate-related events, communities worldwide find themselves consistently caught off guard.
Historic "100-year" weather events now occur with devastating frequency, leaving municipal budgets strained, insurance companies retreating, and rebuilding efforts lagging.
Capital investment must shift to early resilience investment and preparation from disaster recovery.
That's the argument made in a
The systemic failure to prepare for these disasters is not just a public policy problem; it is a profound capital market failure, the report argues.
Nearly 45% of all global natural disaster losses remain completely uninsured, according to the report, which said this staggering "protection gap" means that nearly half of the economic destruction caused by extreme weather must be absorbed by cash-strapped governments, local businesses, and individual households.
"These aren't one-off events – and the insurance industry has been ringing the alarm bell," Singh said.
In October 2023, Hurricane Otis escalated to a Category 5 storm in under 24 hours, hitting Acapulco, Mexico, and causing nearly $16 billion in economic losses, according to the report. More recently, massive flooding
The pain is clear to see in
The Palisades and Eaton fires started on Jan. 7, 2025, killing at least 28 people and destroying more than 16,000 structures,
More than a year and a half later, seven in ten survivors remain displaced from their homes, and more than half face financial losses that exceed their annual income, according to the Milken report.
"With estimates of overall losses ranging between $76 billion and $131 billion, the two fires were the costliest global natural disasters for insurance companies that year," the Milken report said.
The Milken research, developed in partnership with risk management leader Marsh, says that the financial system failed these communities twice: first, through an estimated $5 billion insurance coverage gap that left residents underinsured before the fires; and second, through an underfunded, fragmented recovery system that has paralyzed rebuilding efforts.
Furthermore, the economic fallout extended deep into the region's core sectors; the entertainment industry reported that at least 8,000 film and TV crew members were displaced from their homes, and production schedules at major studios were severely disrupted, according to the report.
"We must invest in protecting communities before the disaster strikes, rather than attempting to rebuild them after they are destroyed," Singh said.
Doing so, however, requires a reimagining of municipal finance, private investment, and public policy, she said.
The Barrier of Fragmentation
"No one owns all the risk," Singh said. "Different entities own different pieces of it."
Local governments manage municipal infrastructure, private developers own commercial real estate, and individual homeowners are responsible for residential properties, she said. This siloed structure prevents a coordinated response to hazards that respect no property lines.
At the same time, Singh said, the public sector is increasingly incapable of funding these upgrades alone.
The American Society of Civil Engineers gave U.S. infrastructure a mediocre "C" grade in its 2025 report card, identifying a massive $3.7 trillion funding gap to bring vital systems into a state of good repair.
The real-world consequences of infrastructure vulnerability were exposed by the impact of
Heavy rains washed out a bridge and flooded roads in the small community of North Cove, shutting down a 1.4-million-square-foot manufacturing facility owned by Baxter. Because this facility supplies 60% of the nation's IV fluids, the localized infrastructure failure triggered a nationwide healthcare crisis, forcing hospitals across the country to postpone patient care, Singh said.
"Resilience is no longer just a government responsibility or a public good that we can simply rely on," says Singh. "It has become a balance sheet imperative for the private sector."
The Resilience Financing Toolkit
To bridge this multi-trillion-dollar funding gap, the Milken Institute's Financial Innovations Lab convened more than 75 stakeholders to design a suite of innovative financial models it calls a Catalytic Policy Playbook.
The report used California as a template to demonstrate how states can clarify risk exposure, build data banks and unlock their balance sheet capacity to scale private financing.
The Milken Institute's "convening power and research work together to drive problem-solving and implementation by the leaders that actually fund, organize, and govern this work day-to-day," Meeks said, adding the report's authors are not currently formally engaged with private industry or government groups to advance report recommendations.
The Milken Institute doesn't disclose participants in its lab or working groups, but the organizations "we spoke to are listed in the final pages of the report," Meeks said.
The report outlines four core mechanisms:
The first is stakeholder-driven community plans to be implemented at the neighborhood level. By breaking down communication silos, these community plans coordinate localized risk mitigation projects. Crucially, when these plans are backed by localized insurance risk data, they become "risk-informed." This risk transparency allows institutional investors to comfortably deploy capital into early-stage projects, Singh said.
Next, the report recommends issuing district-backed resilience bonds, which would be modeled after Florida community development districts.
California has recently created Enhanced Infrastructure Financing Districts to bring back similar economic development tools. The Milken report notes that these EIFDs are a valuable tool in the toolbox, but highlights that future special purpose vehicles must do a better job of sharing local incremental revenues with surrounding jurisdictions.
"California has a particularly rich toolkit for this, and innovation on district-level planning and financing for disaster preparedness is happening "live," as covered by a related,
California's tools are only an example, he said, because every state and local government will have a different policy toolkit to work with and different legislative possibilities for creating new policy and funding tools for resilience.
Ultimately, the Milken Institute used Florida's
CDDs there use tax-exempt bonds to finance infrastructure, governed by an independent board and eventually by residents. Because global institutional investors are already highly familiar with purchasing Florida CDD bonds, Singh said, using this model makes it easier to scale resilience bonds nationally and globally.
This planned-district approach also carries a direct financial benefit. Studies on master-planned communities in Arizona have shown that resilient, planned neighborhoods achieve higher rents and lower vacancy rates than surrounding areas, Singh said, proving to institutional investors that proactive design carries a clear return on investment.
A third recommendation is to use resilience innovation technology investment funds, because Singh said to accelerate the deployment of protective technologies requires private venture capital.
While such funds are designed as private vehicles, they can partner with public entities like the California Infrastructure and Economic Development Bank to establish marquee credibility and leverage public-private partnerships, Singh said.
The fund's objective is to scale and pilot early-stage technologies, such as "BurnBots"—autonomous, all-terrain robots capable of navigating rugged landscapes to clear dry brush and establish wildfire breaks. By investing in these technologies early, insurance companies and venture capitalists can significantly reduce the long-term risk profile of vulnerable regions.
The fourth financing tool the report recommends is to provide affordable financing for localized resilience upgrades, by creating private sector led revolving loan funds capitalized by corporate institutions that benefit directly from regional resilience. These funds would make projects like individual property hardening to help withstand wildfires financially viable, Singh said.
Real-World Proof of Concept
Localized, risk-incentivized programs are already delivering strong financial returns, according to the report.
In Alabama, the state's "Fortified" program (formerly "fortify") offered homeowners financial incentives and insurance premium discounts to upgrade their roofs to the standards set by the Insurance Institute for Business & Home Safety. Notably, three-quarters of the program's projects were eventually funded entirely by the private sector without state capital once the financial incentives were properly aligned, the Milken report said.
Following the landfall of Hurricane Sally in 2020, the returns were undeniable: homes built to Fortified standards saved policyholders up to 65% on losses, and reduced insurer losses by up to 75%, according to the report.
In North Carolina, the report said, the state's insurer of last resort is taking this concept a step further by pioneering a mechanism that functions as a proto-resilience bond. Under this program, if insurance claims fall below a certain threshold due to fortified building practices, the remaining surplus is paid directly into a dedicated account used to finance future localized resilience projects.
In Florida, Collier County voters approved a property tax increase to acquire and preserve threatened natural lands, leading to a massive 200-acre mangrove restoration project—the largest in the state's history. During Hurricane Irma, mangroves acted as a critical shock absorber, providing an estimated $1.5 billion in total flood protection benefits across Florida.
Similarly, the insurance industry is taking notice of these nature-based solutions, Singh said.
Marsh recently collaborated with Conservation International on a mangrove restoration project in the Philippines, aiming to reduce insurance premiums and generate blue carbon credits for coastal asset owners. In Paradise, California, a study by The Nature Conservancy and Marsh determined that pairing fire buffer zones with updated building codes could reduce average annual wildfire losses by up to 42 percent.
The Catalytic Policy Playbook
The ultimate success of these financial innovations relies heavily on supportive public policy. To address this, Meeks drafted a Catalytic Policy Playbook, utilizing California's complex regulatory landscape as a template. The playbook, which the Milken Institute will promote through an upcoming "Governor's Playbook Series," outlines how state governors and local legislative bodies can pass enabling laws to authorize district-backed bonds and streamline permitting for resilience projects.
In a world where climate-related threats are the new reality, the cost of inaction is too high to bear, Singh said. "We can no longer afford to treat resilience as an afterthought or a government-only expense."
