More than a year after a gunman opened fire in an Uvalde, Texas classroom, Monica Muñoz Martinez is still working to connect survivors with mental health resources and raise awareness about the issue.

“There’s still unmet needs and people who are eligible for services still struggle to access those,” said Muñoz Martinez, a university professor who started working with victims’ families and some first responders soon after the May 24, 2022 shooting. “There are resources available but still not everyone knows how to access them, if they are eligible or what they should ask for.”

The lingering struggle in the South Texas town, which is about 82% Latino, underscores the problems with access and even education about mental health in the country. If people continue to struggle to get mental health aid in Uvalde — despite the long spotlight on the trauma of a massacre that claimed the lives of 19 children and two teachers, and wounded 17 others — then what about others whose troubles are not national calamities?

President Joe Biden emphasized the national struggle this week by announcing new proposed regulations aimed at pushing insurance companies to step up their coverage of mental health treatments.

In 2021, 2 in 5 American adults reported experiencing symptoms of anxiety and depression, and 44% of high school students reported struggling with persistent feelings of sadness or hopelessness, exacerbated by the Covid-19 pandemic, social media and gun violence, according to the White House.

“I don’t know what the difference between breaking your arm and having a mental breakdown is — it’s health,” Biden said Tuesday.

The disconnect from services is wider for Latino, Black and Asian adults.

Just 36.1% of Latino adults who had a mental illness in 2021 received services, compared to 52.4% of whites, according to the Substance Abuse and Mental Health Services Administration’s National Survey on Drug Use and Health. About 52% of adults with mental illness who identified as multiracial got services, while 39.4% of Black and 25.4% of Asian adults with mental illness received health services that year.

There are a range of reasons why many Latino families are not connecting with mental health services, including higher poverty rates, language barriers, cultural stigmas about seeking professional therapy or counseling, the cost of therapy, a shortage of culturally relevant mental health services and a lack of mental health professionals, especially those with multicultural backgrounds.

“We are seeing in real time how unprepared communities like Uvalde are and how the need to find solutions for the community can help communities in the future,” said Muñoz Martinez, a history professor at University of Texas at Austin who is working on a campaign to better inform families in Uvalde about mental health.

Even when there’s a commitment to providing services as she’s seen in some places in Texas, Muñoz Martinez said, public education is missing along with ease of access to resources.

Especially in rural communities or in places where residents have strong relationships with their faith, there’s a feeling among some people that they have to decide between having faith and seeking mental health support, “and that is a misconception that we are just learning more about,” she said.

Diana Anzaldua started a nonprofit, Contigo Wellness, to offer culturally relevant mental health services after she experienced firsthand the benefits of seeking therapy.Courtesy Diana Anzualda

For Diana Anzaldua, her desire to provide mental health services to Latinos led to the creation of the Austin nonprofit Contigo Wellness. For Dr. Nancy Ramirez, a clinical psychologist at Texas Tech University Health Sciences Center in El Paso, it has meant connecting students from El Paso to Del Rio to virtual services through the Texas Child Health Access Through Telemedicine program, for which the health science center is the hub.

And a trio of Latinos in Congress — Sens. Bob Menendez, D-N.J., Sen. Alex Padilla, D-Calif. and Rep. Grace Napolitano, D-Calif. — is hoping to achieve that goal through a piece of legislation, the Mental Health for Latinos Act, they’ve introduced to address cultural stigma around mental health and to fix health care disparities.

Struggling to put a spotlight

“We’ve been for 20 years trying to get attention focused on Latino mental health,” Napolitano, who’s ending a quarter-century career in the U.S. House this year, said in a phone interview with NBC News.

Napolitano said the legislation is intended to develop and implement outreach and education strategies to promote mental health services and reduce the stigma of using them, as well as identify gaps and involve consumers and community members in addressing them. 

The point is to “reinforce the message that there is no shame in asking for help,” she said.

Napolitano helped start a school-based mental health services program in her congressional district in 2001, at a time when Latinas were experiencing the highest adolescent suicide rates. The program, which started in one high school and three middle schools, has since expanded to dozens of schools.

The legislation introduced by the three Latino lawmakers is unlikely to advance as a stand-alone bill, Napolitano said. They hope it can be folded into the Pursuing Equity in Mental Health Act, a bill introduced by Rep. Bonnie Watson Coleman, D-N.J., and Napolitano in the House, with a companion bill introduced in the Senate by Menendez. The House approved the bill in 2021, but the Senate did not take it up for a vote. 

Ramirez, the psychologist from El Paso, said there has been a cultural shift in the country toward better mental health access. “However, the Hispanic community continues to face a number of disparities,” she said.

There are general ideas of what mental illness looks like, but sometimes, in some cultures, it may show up in a person first as an issue in the body.

For example, when it comes to anxiety, “the way these experiences are communicated within the Hispanic population are more likely to be a report of somatic symptoms,” Ramirez said. “One of the disorders may be described as “ataque de nervios” (attack of the nerves), which is more about anxiety, but may be diagnosed as physical. “Providers have to be familiar with that,” she said.

Anzaldua said she was 20 before she first saw a therapist. She, her mother and siblings had fled an abusive and alcoholic father. They experienced homelessness for a while and Anzaldua became pregnant at 13; three years later she moved out to raise her children with their father.

Anzaldua said that while working with a Latino nonprofit, a white male colleague mentioned he was in therapy, leading her to ask what that was and then giving it a try. The concept of just telling people her problems seemed absurd and she stopped and started a few times, but finally found a therapist she connected with and continued.

Some years later, her positive experience led her to create Contigo Wellness just as the pandemic began, which made more clear the need for mental health services. Latinos were more likely to have to go in person to their jobs — and also to lose them — and were disproportionately hit by death and illness from Covid. They experienced higher levels of anxiety and depressive disorders during the pandemic, according to a federal survey at the time.

For Anzaldua, it’s about “how do we get to a place where we are ending trauma and not perpetuating it, and part of that is getting everyone access. How do we get everyone to see the importance of mental health, educating them, creating the awareness and removing all the barriers we see,” she said.

For communities of color, mental wellness may need to involve addressing generational trauma, histories of oppression and ongoing racism, Anzaldua said. People of color could have generations of such experiences.

Anzaldua said their aim is to “decolonize” therapy, to connect people to healing in ways that are comfortable for them, such as Reiki energy healing, acupuncture, curanderismo (traditional healing) and other methods to make some people more comfortable.

To overcome the stigma around seeking help, Contigo launched a program, “Tu importas!” (You matter) to help overcome the pressure, especially in communities of color, to put onself second to others, where it’s considered selfish to take care of oneself instead of others in the family.

Even with all her work in mental health services, Anzaldua said she still has family members who are not quite “on board” with the idea of seeking counseling or therapy. Some are proud of her, she said, but they still tell her they are still not going to therapy.

Suzanne Gamboa

Suzanne Gamboa is a national reporter for NBC Latino and NBCNews.com

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More than a year after a gunman opened fire in an Uvalde, Texas classroom, Monica Muñoz Martinez is still working to connect survivors with mental health resources and raise awareness about the issue.

“There’s still unmet needs and people who are eligible for services still struggle to access those,” said Muñoz Martinez, a university professor who started working with victims’ families and some first responders soon after the May 24, 2022 shooting. “There are resources available but still not everyone knows how to access them, if they are eligible or what they should ask for.”

The lingering struggle in the South Texas town, which is about 82% Latino, underscores the problems with access and even education about mental health in the country. If people continue to struggle to get mental health aid in Uvalde — despite the long spotlight on the trauma of a massacre that claimed the lives of 19 children and two teachers, and wounded 17 others — then what about others whose troubles are not national calamities?

President Joe Biden emphasized the national struggle this week by announcing new proposed regulations aimed at pushing insurance companies to step up their coverage of mental health treatments.

In 2021, 2 in 5 American adults reported experiencing symptoms of anxiety and depression, and 44% of high school students reported struggling with persistent feelings of sadness or hopelessness, exacerbated by the Covid-19 pandemic, social media and gun violence, according to the White House.

“I don’t know what the difference between breaking your arm and having a mental breakdown is — it’s health,” Biden said Tuesday.

The disconnect from services is wider for Latino, Black and Asian adults.

Just 36.1% of Latino adults who had a mental illness in 2021 received services, compared to 52.4% of whites, according to the Substance Abuse and Mental Health Services Administration’s National Survey on Drug Use and Health. About 52% of adults with mental illness who identified as multiracial got services, while 39.4% of Black and 25.4% of Asian adults with mental illness received health services that year.

Story continues

There are a range of reasons why many Latino families are not connecting with mental health services, including higher poverty rates, language barriers, cultural stigmas about seeking professional therapy or counseling, the cost of therapy, a shortage of culturally relevant mental health services and a lack of mental health professionals, especially those with multicultural backgrounds.

“We are seeing in real time how unprepared communities like Uvalde are and how the need to find solutions for the community can help communities in the future,” said Muñoz Martinez, a history professor at University of Texas at Austin who is working on a campaign to better inform families in Uvalde about mental health.

Even when there’s a commitment to providing services as she’s seen in some places in Texas, Muñoz Martinez said, public education is missing along with ease of access to resources.

Especially in rural communities or in places where residents have strong relationships with their faith, there’s a feeling among some people that they have to decide between having faith and seeking mental health support, “and that is a misconception that we are just learning more about,” she said.

Diana Anzualda. (Courtesy Diana Anzualda)

For Diana Anzaldua, her desire to provide mental health services to Latinos led to the creation of the Austin nonprofit Contigo Wellness. For Dr. Nancy Ramirez, a clinical psychologist at Texas Tech University Health Sciences Center in El Paso, it has meant connecting students from El Paso to Del Rio to virtual services through the Texas Child Health Access Through Telemedicine program, for which the health science center is the hub.

And a trio of Latinos in Congress — Sens. Bob Menendez, D-N.J., Sen. Alex Padilla, D-Calif. and Rep. Grace Napolitano, D-Calif. — is hoping to achieve that goal through a piece of legislation, the Mental Health for Latinos Act, they’ve introduced to address cultural stigma around mental health and to fix health care disparities.

Struggling to put a spotlight

“We’ve been for 20 years trying to get attention focused on Latino mental health,” Napolitano, who’s ending a quarter-century career in the U.S. House this year, said in a phone interview with NBC News.

Napolitano said the legislation is intended to develop and implement outreach and education strategies to promote mental health services and reduce the stigma of using them, as well as identify gaps and involve consumers and community members in addressing them.

The point is to “reinforce the message that there is no shame in asking for help,” she said.

Napolitano helped start a school-based mental health services program in her congressional district in 2001, at a time when Latinas were experiencing the highest adolescent suicide rates. The program, which started in one high school and three middle schools, has since expanded to dozens of schools.

The legislation introduced by the three Latino lawmakers is unlikely to advance as a stand-alone bill, Napolitano said. They hope it can be folded into the Pursuing Equity in Mental Health Act, a bill introduced by Rep. Bonnie Watson Coleman, D-N.J., and Napolitano in the House, with a companion bill introduced in the Senate by Menendez. The House approved the bill in 2021, but the Senate did not take it up for a vote.

Ramirez, the psychologist from El Paso, said there has been a cultural shift in the country toward better mental health access. “However, the Hispanic community continues to face a number of disparities,” she said.

There are general ideas of what mental illness looks like, but sometimes, in some cultures, it may show up in a person first as an issue in the body.

For example, when it comes to anxiety, “the way these experiences are communicated within the Hispanic population are more likely to be a report of somatic symptoms,” Ramirez said. “One of the disorders may be described as “ataque de nervios” (attack of the nerves), which is more about anxiety, but may be diagnosed as physical. “Providers have to be familiar with that,” she said.

Anzaldua said she was 20 before she first saw a therapist. She, her mother and siblings had fled an abusive and alcoholic father. They experienced homelessness for a while and Anzaldua became pregnant at 13; three years later she moved out to raise her children with their father.

Anzaldua said that while working with a Latino nonprofit, a white male colleague mentioned he was in therapy, leading her to ask what that was and then giving it a try. The concept of just telling people her problems seemed absurd and she stopped and started a few times, but finally found a therapist she connected with and continued.

Some years later, her positive experience led her to create Contigo Wellness just as the pandemic began, which made more clear the need for mental health services. Latinos were more likely to have to go in person to their jobs — and also to lose them — and were disproportionately hit by death and illness from Covid. They experienced higher levels of anxiety and depressive disorders during the pandemic, according to a federal survey at the time.

For Anzaldua, it’s about “how do we get to a place where we are ending trauma and not perpetuating it, and part of that is getting everyone access. How do we get everyone to see the importance of mental health, educating them, creating the awareness and removing all the barriers we see,” she said.

For communities of color, mental wellness may need to involve addressing generational trauma, histories of oppression and ongoing racism, Anzaldua said. People of color could have generations of such experiences.

Anzaldua said their aim is to “decolonize” therapy, to connect people to healing in ways that are comfortable for them, such as Reiki energy healing, acupuncture, curanderismo (traditional healing) and other methods to make some people more comfortable.

To overcome the stigma around seeking help, Contigo launched a program, “Tu importas!” (You matter) to help overcome the pressure, especially in communities of color, to put onself second to others, where it’s considered selfish to take care of oneself instead of others in the family.

Even with all her work in mental health services, Anzaldua said she still has family members who are not quite “on board” with the idea of seeking counseling or therapy. Some are proud of her, she said, but they still tell her they are still not going to therapy.

This article was originally published on NBCNews.com

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Efforts to close the persistent and detrimental Black-white homeownership gap, which is currently at 30 percentage points, must include not only measures to decrease the barriers to Black homeownership opportunity, but also mechanisms to ensure that homeownership is sustainable once achieved.

Mortgage reserve accounts are among the innovative solutions that could help homeowners overcome temporary hardships and get back on track with their mortgage payments, instead of falling into foreclosure, according to a new report from the Federal Home Loan Bank of San Francisco (FHLBank San Francisco) and the Urban Institute.

The new comprehensive report from the Racial Equity Accelerator for Homeownership examines a variety of new product structures aimed at supporting homeowners who experience temporary financial hardship, with a particular focus on how mortgage reserve accounts could help homeowners avoid default. This solution would disproportionately benefit Black families, who are more than twice as likely as white families to lose their home to foreclosure.

Recent research indicates that the greatest number of defaults are caused by shocks such as unexpected expenses (64%); job loss (56%); large debt payments (44%); or illness, disability, or death (43%); and that Black homeowners are more vulnerable to all these shocks due to their generally lower levels of liquid assets, more precarious employment, larger debt-to-income ratios, greater medical debt, and higher cost of homeownership.

The long history of reduced access to wealth-building opportunities, that Black households have experienced means they have less financial cushion to fall back on in the event of a financial shock; in contrast, the typical white family has eight times the wealth of the typical Black family.

“Efforts to promote Black homeownership and narrow the Black-white wealth gap are undermined when homeownership is not sustained,” said Janneke Ratcliffe, VP of the Housing Finance Policy Center at the Urban Institute. “For this reason, we need to redouble our efforts to develop effective ways to give homeowners breathing room so that a financial rough patch does not lead to losing a home.”

“The housing finance industry has created a robust foreclosure prevention toolkit over the past 15 years, but there’s still significant room for improvement, and we need to pursue multiple new avenues to reduce the risk of default. These financial tools, designed to help families keep their homes and build generational wealth, would also make mortgages less risky for lenders, insurers, and investors,” said Teresa Bryce Bazemore, President and CEO of FHLBank San Francisco. “Our joint research with the Urban Institute has identified a number of promising ways to help close the racial gap in homeownership and wealth building. This latest report highlights the potential of mortgage reserve accounts, and we welcome the opportunity to further explore this type of solution.”

The report, Using Mortgage Reserves to Advance Black Homeownership, explores solutions that have been proposed or could be enhanced to sustain homeownership, particularly in addressing shocks that hit Black homeowners harder than others. These solutions, which range from tried-and-tested approaches to still-undeveloped ideas, fall into three broad categories: enhanced foreclosure prevention (e.g., forbearance programs, loan modification), insurance (e.g., mortgage protection insurance, home warranty insurance, mortgage insurance that protects the borrower rather than the lender, a borrowers mutual insurance fund), and dedicated reserve accounts.

While all these tools have potential and many could work together, this report focuses on the mortgage reserve account, a savings account tied to an individual mortgage and funded by reducing the down payment. If borrowers experience an income shock or an unexpected expense, they typically use the account to cover mortgage payments.

Several mortgage reserve models have been developed and tested, some of which—such as the Prosperity Now pilot program and the Self-Help credit union network’s Savings Account for Emergencies program—include matched savings to encourage participation. Mortgage reserve account programs are also being explored as part of the Equitable Housing Finance Plans. Research suggests that such accounts mitigate foreclosures by providing emergency savings for borrowers to draw on if needed.

The authors of Using Mortgage Reserves to Advance Black Homeownership analyze default rates and loss severities on loans and determine that reserves improve performance, even on mortgages with higher loan-to-value ratios, and reduce overall losses, even though severities are higher. However, reserve accounts do involve trade-offs for both homeowners and lenders, and more study and testing are needed to determine the optimum amount and duration of reserves and the conditions under which the reserves can be used, as well as to answer more detailed operational questions. The authors outline a blueprint for piloting a mortgage reserve account program that could generate a critical mass of evidence to inform further product development.

This report is the third in a series of four developed through a two-year, $1.5 million collaboration between the Urban Institute and FHLBank San Francisco. Previous reports examined incorporating alternative data into mortgage underwriting and mitigating the impact of student debt on Black homeownership. Future research will address using artificial intelligence and other new technologies to overcome historical mortgage lending biases.

To read the full report, including more data, charts, and methodology, click here.

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Mortgage Reserve Accounts Aimed at Averting Foreclosure Could Help Narrow Black-White Homeownership Gap

SAN FRANCISCO and WASHINGTON, June 22, 2023 (GLOBE NEWSWIRE) — Efforts to close the persistent and detrimental Black-white homeownership gap, currently at 30 percentage points, must include not only measures to decrease the barriers to Black homeownership opportunity, but also mechanisms to ensure that homeownership is sustainable once achieved. Mortgage reserve accounts are among the innovative solutions that could help homeowners overcome temporary hardships and get back on track with their mortgage payments, instead of falling into foreclosure.

A comprehensive

new report

from the

Racial Equity Accelerator for Homeownership

— a collaboration of Federal Home Loan Bank of San Francisco (FHLBank San Francisco) and the Urban Institute — examines a variety of new product structures aimed at supporting homeowners who experience temporary financial hardship, with a particular focus on how mortgage reserve accounts could help homeowners avoid default. This solution would disproportionately benefit Black families, who are more than twice as likely as white families to lose their home to foreclosure.

Recent

research

indicates that the greatest number of defaults are caused by shocks such as unexpected expenses (64%); job loss (56%); large debt payments (44%); or illness, disability, or death (43%), and that Black homeowners are more vulnerable to all these shocks due to their generally lower levels of liquid assets, more precarious employment, larger debt-to-income ratios, greater medical debt, and higher cost of homeownership. The long history of reduced access to wealth-building opportunities, that Black households have experienced means they have less financial cushion to fall back on in the event of a financial shock; in contrast, the typical white family has

eight times

the wealth of the typical Black family.

“Efforts to promote Black homeownership and narrow the Black-white wealth gap are undermined when homeownership is not sustained,” said Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute. “For this reason, we need to redouble our efforts to develop effective ways to give homeowners breathing room so that a financial rough patch does not lead to losing a home.”

“The housing finance industry has created a robust foreclosure prevention toolkit over the past 15 years, but there’s still significant room for improvement, and we need to pursue multiple new avenues to reduce the risk of default. These financial tools, designed to help families keep their homes and build generational wealth, would also make mortgages less risky for lenders, insurers, and investors,” said Teresa Bryce Bazemore, president and CEO of FHLBank San Francisco. “Our joint research with the Urban Institute has identified a number of promising ways to help close the racial gap in homeownership and wealth building. This latest report highlights the potential of mortgage reserve accounts, and we welcome the opportunity to further explore this type of solution.”

The report,

Using Mortgage Reserves to Advance Black Homeownership

, explores solutions that have been proposed or could be enhanced to sustain homeownership, particularly in addressing shocks that hit Black homeowners harder than others. These solutions, which range from tried-and-tested approaches to still-undeveloped ideas, fall into three broad categories: enhanced foreclosure prevention (e.g., forbearance programs, loan modification), insurance (e.g., mortgage protection insurance, home warranty insurance, mortgage insurance that protects the borrower rather than the lender, a borrowers mutual insurance fund), and dedicated reserve accounts.

While all these tools have potential and many could work together, this report focuses on the mortgage reserve account, a savings account tied to an individual mortgage and funded by reducing the downpayment. If borrowers experience an income shock or an unexpected expense, they typically use the account to cover mortgage payments.

Several mortgage reserve models have been developed and tested, some of which — such as the Prosperity Now pilot program and the Self-Help credit union network’s Savings Account for Emergencies program — include matched savings to encourage participation. Mortgage reserve account programs are also being explored as part of the Equitable Housing Finance Plans. Research suggests that such accounts mitigate foreclosures by providing emergency savings for borrowers to draw on if needed.

The authors of

Using Mortgage Reserves to Advance Black Homeownership

analyze default rates and loss severities on loans and determine that reserves improve performance, even on mortgages with higher loan-to-value ratios, and reduce overall losses, even though severities are higher. However, reserve accounts do involve trade-offs for both homeowners and lenders, and more study and testing are needed to determine the optimum amount and duration of reserves and the conditions under which the reserves can be used, as well as to answer more detailed operational questions. The authors outline a blueprint for piloting a mortgage reserve account program that could generate a critical mass of evidence to inform further product development.

This report is the third in a series of four developed through a two-year, $1.5 million collaboration between the Urban Institute and FHLBank San Francisco. Previous reports examined incorporating alternative data into mortgage underwriting and mitigating the impact of student debt on Black homeownership. Future research will address using artificial intelligence and other new technologies to overcome historical mortgage lending biases.

About the Federal Home Loan Bank of San Francisco


The Federal Home Loan Bank of San Francisco is a member-driven cooperative helping local lenders in Arizona, California, and Nevada build strong communities, create opportunity, and change lives for the better. The tools and resources we provide to our member financial institutions — commercial banks, credit unions, industrial loan companies, savings institutions, insurance companies, and community development financial institutions — propel homeownership, finance quality affordable housing, boost economic vitality, and revitalize whole neighborhoods. Together with our members and other partners, we are making the communities we serve more vibrant, equitable, and resilient and changing lives for the better.

About the Urban Institute


The nonprofit Urban Institute is a leading research organization dedicated to developing evidence-based insights that improve people’s lives and strengthen communities. For 50 years, Urban has been the trusted source for rigorous analysis of complex social and economic issues; strategic advice to policymakers, philanthropists, and practitioners; and new, promising ideas that expand opportunities for all. Our work inspires effective decisions that advance fairness and enhance the well-being of people and places.

Source: FHLBank San Francisco and Urban Institute

Media Contacts:
Mary Long
Senior Director, Marketing Communications
longm@fhlbsf.com
415.616.2556

DeQuendre Bertrand
Communications Director, Urban Institute Housing Finance Policy Center
HFPCPress@urban.org
202-261-5958

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Joe Peiser is Head of Commercial Risk Solutions, North America for Aon. He can be reached at [email protected]

From the economic fallout of COVID-19, to the hard property market, to the volatility of macroeconomic factors, it has become increasingly difficult for insureds to adequately protect themselves from the risks posed by this landscape.

While traditional defensive strategies and risk management tools are still important, they are often no longer enough.

As a result, we are seeing a widening of the so-called protection gap, i.e., the difference between risk transfer needs and available capacity. This year alone, clean property accounts with modest catastrophe exposure have seen rate increases between 10 and 20%, and CAT-exposed accounts have seen price increases of at least 25%.

Some have seen increases in the triple digits.

More problematic for some has been the severe constriction of natural catastrophe coverage, leaving them vulnerable to losses that could damage their bottom lines much more than a premium increase. And natural catastrophe losses are on the rise, especially in severity — driven by the accumulation of values, often understated, in catastrophe-prone geographies.

This increase in catastrophe exposure is an example of the factors that are further hardening the property market. Industry experts continue to anticipate a hard market for the coming quarters, meaning less capacity, higher deductibles, and more need for expanded insurance solutions.

The insurance industry has responded to increased natural catastrophes and other risks with innovative offerings such as parametric and structured insurance that can complement traditional insurance programs. These are techniques that have been around for years and have been tested but had not been widely considered when traditional risk transfer insurance was widely available at attractive prices.

Today these techniques, and others, are being considered by many organizations. Moreover, with the availability of more sophisticated modeling and more robust data sets, risk financing can move from purchasing off-the-shelf commodities and toward being integrated with an organization’s strategic financial plan.

Data-Driven Approaches Help Better Understand Insurance Portfolio Costs

Companies have been increasingly looking for ways to manage risks more proactively. Data-driven approaches can help provide insight into insurance portfolio costs, allowing firms to better understand their entire risk profile and better understand the trade-offs between risk retention and risk transfer — regardless of the risk transfer technique.

In the property space, there has been a significant rise in natural catastrophes in recent years, with 2022’s Hurricane Ian further compounding the need for an innovative approach to risk assessment.

Within Aon, we’ve found tools like our business interruption (BI), contingent BI, and asset valuations allow firms to unlock data insights that enable clients to see a clearer picture of their full risk portrait. This not only provides them with the most comprehensive picture of their insurance needs but also actionable insights to quantify the total cost of risk and analyze their risk transfer options.

Aon’s Risk Financing Decision Platform (RFDP) is an example of the sophisticated modeling mentioned above, and another example of innovation that helps manage and possibly close the protection gap for clients.

The platform walks through three key steps to best support companies making impactful decisions on their risk transfer portfolio based on their risk profile and their risk tolerance. With this tool and the thoughtful problem-solving it provokes, clients can compare their current insurance portfolio with a myriad of other options in real-time, allowing them to measure insurance program benefits versus cost.

This tool also offers the flexibility to instantaneously mix and match different insurance structures, regardless of risk transfer technique and regardless of the risk taking market — insurance, reinsurance or capital markets.

Non-traditional Offerings Fill In Gaps for Weather-Related Risks

As weather events and other evolving risks become more commonplace, there are new gaps in coverage that are increasingly costly if left uninsured.

As an example, the National Hurricane Center noted Hurricane Ian was the most expensive hurricane in Florida’s history, with costs continuing to be reported six months after the storm. Today, Florida also faces historic flooding that will also take time to calculate the true costs and determine the depth of the flooding impact on the region.

All of these costs are further amplified considering that conventional insurance can take months or years for a claim to be adjusted and paid, especially in the case of a coverage or valuation dispute.

But, leveraging parametric insurance for weather scenarios like Florida’s recent flooding, organizations often receive risk transfer proceeds and thus liquidity that may be sorely needed in a matter of weeks.

Parametric solutions can be particularly helpful for these types of “gray swan” scenarios, or events that are known and possible to happen, but are assumed to be unlikely to occur.

Parametric insurance bridges the gaps in coverage for a variety of risks.

This offering is based on predetermined, measurable criteria — such as wind speed, temperature, or rainfall — that triggers payment when the conditions occur. This can allow companies to tailor their protection to their specific needs and provides protection even when traditional insurance may not be available or may fall short.

This type of non-traditional offering is particularly useful for weather-related risks such as those associated with extreme temperatures or storms.

By providing a form of coverage that is otherwise difficult to obtain, parametric insurance can help companies manage their operations and financial losses during these events more effectively.

Parametric insurance can also provide additional risk transfer proceeds if traditional coverages have been exhausted due to large losses or high deductibles.

In addition, parametric solutions enable companies to better understand and predict the cost of damage from weather events, allowing them to budget and plan more effectively for the future.

By leveraging real-time data from satellites, sensors, and other sources, insurers can provide accurate estimates of potential losses before they occur — giving companies invaluable insight into how much protection they need in order to safeguard themselves financially from these risks.

Innovative Insurance Products Are Here to Stay

While our current risk landscape is developing rapidly, the industry is evolving and innovating with just as much speed — bringing a crucial shift in mindset from defensive to offensive.

Several of the top innovations on the market today share a focus on flexibility, increased visibility into costs and coverage options, and an eye on the horizon of “gray swan” events. Together, these speak to this shift towards an offensive mindset, and provide quick, flexible solutions that speak to emerging risks posed by weather events and market conditions.

Either through comparing insurance portfolios in real-time through RFDP or solving for gaps in coverage via parametric solutions, companies can take advantage of tools today to provide more sustainable predictability and security for their businesses tomorrow. &

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