One state is pioneering paying for roof upgrades as storms boost insurance costs

This story is republished from Stateline. Read the original article.

When Hurricane Sally struck coastal Alabama in 2020, many residents saw the roofs torn from their homes or damaged by the high winds.

But not Matt Fetner.

“Every house around had blue tarps on it, except for mine,” said the resident of Orange Beach, a small city on the Gulf Coast.

Just a few years before, Fetner had upgraded his roof with materials designed to withstand hurricane-force winds. The new roof met a standard known as Fortified by using specialized nails and shingles, stronger edges and a sealed roof deck.

Fetner’s roof was paid for by the state of Alabama, which has spent millions of dollars in recent years to help thousands of residents strengthen their homes. The state has invested that money in hopes of staving off a home insurance crisis, as property insurers have pulled out of some regions of the country or dramatically raised premiums in the wake of escalating disasters driven by climate change.

The idea is simple: Homeowners with stronger roofs pay less for their insurance premiums. And over time, as thousands of homes become more resilient, insurance companies will have to pay out less for claims, making Alabama a more attractive place to do business.

“A lot of these insurance companies were not going into coastal areas, simply from a risk standpoint,” said Travis Taylor, acting director of the Strengthen Alabama Homes program, which is overseen by the state Department of Insurance. “But now as people have gotten Fortified roofs, the insurance companies are hounding them.”

Other states have taken notice. In recent years, lawmakers in at least five other states have established similar programs to pay for Fortified roofs. While those efforts are still in their early stages, leaders say they hope to replicate Alabama’s success.

Alabama’s grant program has helped more than 7,000 residents upgrade their roofs. Meanwhile, as participating roofers and contractors have gotten familiar with the standard, they’ve begun offering it as a part of their regular business. Of the 60,000 certified Fortified homes nationwide, 50,000 are in Alabama.

“Every year, the interest keeps growing,” said Brent Sellers, a contractor with Alliance Roofing, which operates in Alabama and Mississippi. “[Grant] program or not, people want Fortified roofs.”

Fortified roofs meet a standard developed by the Insurance Institute for Business & Home Safety, an industry nonprofit that serves as a leader in safety research. Some local governments have adopted building codes based on that standard, and Alabama’s program uses the institute’s qualification.

While state leaders say they’re still collecting data on insurance premiums, some industry leaders say the program is clearly working.

“There is sufficient resilience now in Alabama that the insurance market is far healthier than the insurance market in neighboring states,” said Michael Newman, general counsel with the institute.

‘Serious About Resiliency’

Since Alabama issued its first grant in 2016, the state has doled out more than $70 million to cover roof projects on almost 7,100 homes. Residents are entitled to up to $10,000 per project, issued on a first-come, first-served basis. State officials award the funding directly to contractors who bid on the work.

The larger success story, state leaders say, is that more than 40,000 homeowners have installed a Fortified roof without state funding. The change has come as Alabama’s coastal counties have updated their building codes to require such roofs on new construction.

“The builders in Alabama, once they learn how to do the Fortified thing, they really like it,” said Lars Powell, executive director of the Alabama Center for Insurance Information and Research at the University of Alabama. “The Fortified construction movement will be remembered as a very important thing that allowed people to continue to live on the coast without being super-wealthy.”

Powell’s research has found that Fortified homes sell for 7% more on average, and owners are far more likely to secure insurance coverage from major carriers. Alabama also mandates that insurers provide discounts of 20% to 60% on wind coverage for Fortified homes, depending on the level of the upgrades.

Meanwhile, other states have seen insurance companies leave the market, drop high-risk customers or raise premiums drastically. Experts note climate change is causing more frequent and severe disasters, forcing insurers to adjust as they pay out more and more for claims.

Louisiana’s insurance market has been particularly hard hit, following devastating hurricane seasons in 2020 and 2021. In 2022, the state launched the Louisiana Fortify Homes Program, modeled on Alabama’s, that also offers $10,000 grants.

“This program is part of our pitch to insurance companies that Louisiana is serious about resiliency,” said John Ford, deputy commissioner of the public affairs division of the Louisiana Department of Insurance.

The legislature set aside $30 million last year in the program’s first round of funding, and lawmakers put in another $15 million this year. In total, state officials say that should cover about 4,500 roofs. The agency has issued 900 grants so far.

This year, Louisiana lawmakers passed a measure that will task state regulators with calculating the insurance discounts that Fortified homeowners should receive.

Inland Areas Join the Effort

While hurricanes on the coast have gotten more attention, Midwestern states have been hit with severe hailstorms, windstorms and tornadoes that have driven up insurance costs. Minnesota lawmakers established a home resilience grant program last year to deal with the crisis.

“Prevention is a lot cheaper than actually paying for storm damage,” said Julia Dreier, deputy commissioner for the Insurance Division of Minnesota’s Commerce Department. “The hope is that we can prevent the need for insurance payouts.”

Agency officials are still setting up the program, which has not yet issued grants. Regulators expect the funding for the initial round of grants to be included in next year’s state budget. But insurance companies have already begun planning to offer discounts to residents who upgrade their roofs.

In Oklahoma, a state that already ranks among the most expensive for home insurance, more than 100 tornadoes have touched down this year. Earlier this year, lawmakers enacted a grant program for Fortified homes similar to the ones other states have adopted.

“We are hoping to see a lot of the same great results that Alabama has seen—not only homeowners seeing premium discounts, but over time lower claim exposure [for insurers],” said Ashley Scott, government and community affairs director with the Oklahoma Insurance Department.

Once it’s up and running, state leaders expect the program to offer about $10 million a year in grants. The agency expects to start issuing funds next year.

Meanwhile, lawmakers in Kentucky and South Carolina have established similar programs, also administered by state insurance regulators. And Mississippi set aside $5 million for a program to help residents shore up their homes, including roof upgrades.

The Insurance Institute for Business & Home Safety, which created the Fortified standard, expects to see a boom in resilient roof construction as more states promote such upgrades.

“We can’t do a lot in the short term about rising risk from severe weather,” said Newman, the group’s general counsel. “But this particular home can be made more durable, can be made more resilient.”