Making Mamdani’s Insurance Plan Work

Isabel Peñaranda Currie, Moira Birss, and Emily Eisner propose a state-level natural disaster insurance program to complement Mamdani’s transformative city-backed insurance initiative.

When Mayor Zohran Mamdani took the stage at the Citizens Housing & Planning Council’s Annual Luncheon on April 16, few expected an insurance announcement to steal the show. Yet that’s precisely what happened. After identifying insurance as one of the fastest growing costs facing New Yorkers, Mamdani unveiled a city-backed insurance program for subsidized and rent-stabilized buildings to tackle those rising rates. While insurance may not be the likeliest of battlegrounds for revolutionary change, this program, the first of its kind in the country, represents a radical, public approach to a market failure that is making housing less affordable.

On its own, however, a city-level insurer cannot resolve the insurance crisis. In an age of increasing climate hazards, insurance coverage for large-scale disasters requires spreading risk beyond single-city geographies, so that a single calamity does not collapse an insurance pool all at once. Moreover, to lower insurance costs, the city must address the underlying source of the risk—climate change—through adaptation and mitigation measures. Effectively reducing the cost of insurance requires centrally planned and executed investment in protecting homes and adapting to the changing natural world. Without complementary initiatives to address disaster risk, Mamdani’s transformative program will be unable to achieve its stated aims.

For this reason, we propose a state-level, single-payer, public natural disaster insurance program. This program would pool disaster risk across New York, while undertaking climate adaptation investments to lower such risk in the future.

While the City has yet to announce full details for the program, early indications are promising. The initiative will provide public backing to a commercial private insurer, which will issue property and liability insurance policies for twenty thousand apartments starting in 2027, scaling up to one hundred thousand by 2030. And although the policies will be administered by a private insurer, the City Government will set the terms.

An interagency working group, with members from the New York City Economic Development Corporation (EDC), the Housing Development Corporation (HDC), and the Department of Housing Preservation and Development, is managing the selection and partnership of the insurance program. The City is setting a high bar for potential insurers: the Request For Proposals includes specifications to create a program that “(i) cuts premiums by 20 percent or more, (ii) is self-supporting with a strong balance sheet, and (iii) can scale to serve a significant share of the affordable and rent-stabilized housing stock over time.”

One might think that this arrangement would put the City of New York on the hook for paying out the insurance claims under the program; but the City expects this program to be self-sufficient, meaning that it will raise its necessary funds through some combination of premiums charged and investment income. Further, the program cuts costs through two main mechanisms. First, because the program is publicly backed and controlled, the profit-motive is eliminated, reducing the drive to hike premiums. Second, the City is leveraging the scale of procurement—that is, the fact that it is purchasing thousands of insurance policies—to secure lower prices.

In addition to saving money on New York City residents’ insurance bills, the reduction in premium prices is also expected to reduce the City’s need to provide housing finance subsidies. In fact, Deputy Mayor for Housing Leila Bozorg estimates that this reduction will save the City $500–700 million over time, savings that will be reinvested to make the program self-sustaining.

This new insurance program also provides important scaffolding for the Mayor’s campaign pledge to “Freeze the Rent” for over 1 million rent-stabilized units. The rising costs of housing provision—including insurance costs—present the most substantial barrier to that pledge, since such costs are largely beyond the control of landlords who must either eat them or pass them on to tenants in the form of rent increases. By addressing one of the main contributors to rising housing costs and acknowledging the underlying complexities landlords face, this measure should make the prospect of a rent freeze more palatable to its most vocal opponents.

Multi-family housing requires two primary types of insurance: property and liability. Property insurance is typically used to cover the risk of damage to the physical structure, such as that caused by water, storms, fire, or other perils. Other kinds of larger “catastrophic” events, such as earthquakes and floods, may not be covered and often require a separate type of insurance. Liability (or casualty) insurance covers legal defense costs and damages in the case of accidents and theft.

In recent years, the costs of both types of insurance have been rising, deepening the housing affordability crisis. As explained in a report released today from the Climate and Community Institute, these rising insurance costs, combined with a lack of insurance availability and insurance inadequacy, are actively undermining the development of new affordable housing and the conditions and viability of existing housing. These costs are acute in New York State and New York City, where rising insurance premiums and restrictive underwriting affect the entire housing sector, making it more difficult to secure funding for housing development and provision while increasing the strain on building operating expenses—especially in affordable and older housing.

These costs have also been a key driver of landlord expenses: last year alone, insurance costs rose almost 20 percent—the largest proportional increase of any cost component source. Affordable properties have been hit particularly hard. According to a report from the NYU Furman Center, insurance expenses for owners of a large share of New York City’s rent-stabilized apartments grew by roughly 150 percent between 2019 and 2025. Similarly, the New York Housing Conference found that affordable-housing insurance premiums were rising by an average of 26 percent annually, and the average cost to insure an affordable apartment more than doubled between 2019 and 2023, from $869 to $1,770 per unit.

One of the primary mechanisms driving rising insurance costs—particularly property insurance—is climate change, which leads to more frequent and extreme severe weather events. This results in more damage to homes and costlier insurance claims, which are then passed on to policyholders through higher premiums. Recent studies confirm that areas facing the highest climate risks experience significantly more expensive insurance and higher rates of coverage cancellation. For example, the Federal Insurance Office reports that households living in the 20 percent of ZIP codes with the highest expected annual losses to buildings from climate-related perils paid an average of $2,321 in premiums, 82 percent more than those in the 20 percent lowest climate-risk ZIP codes. The same report found a five-fold increase in the annual number of billion-dollar weather and climate disasters from 2018 to 2022, when compared to the 1980s. In 2024 alone, the United States experienced 27 individual weather and climate disasters with at least $1 billion in damages, totaling $182.7 billion.

And yet, the way that risk is priced and passed onto policyholders is far from transparent, and ultimately controlled by black-boxed insurance modelling and pricing systems. Because insurers can offset much of their financial risk through reinsurance and by investing premium income in capital markets, many insurers have reported record profits despite experiencing underwriting losses in certain states. Indeed, according to according to a National Association of Insurance Commissioners report in 2023, the US property and casualty industry recorded its “best mid-year underwriting gain1 in nearly 20 years.”

Rising insurance costs are also driven by the profit-seeking structure of private insurance companies. While insurance is conceptually meant to pool risk for broad public protection, profit-seeking insurance companies view rate hikes, coverage gaps, and claims denials as features of the insurance markets, particularly in the context of increasing disaster risk. This dynamic illustrates what the Climate and Community Institute has termed the “profit vs. protection” conflict. The short-term nature of quarterly earnings reports and 1-year (or less) policy contracts also undermine any incentive insurers might have to invest in risk mitigation, which operates on a longer timeline. Given that disaster insurance is essential to the country’s housing finance system, a more stable, public good-oriented approach is needed.

Although the City has proposed an ambitious and necessary first step to tackle rising insurance costs, the program cannot tackle this problem on its own, for two main reasons.

The first is the need to geographically diversify disaster risk. Insurance generally works by pooling risk—covering varied populations and places so that the risk of damage is spread among many policyholders at a given time. Insurers achieve this by holding onto a diverse portfolio of property types, for example, each carrying different levels of risk exposure. Since hurricanes, wildfires, hail, and other climate hazards hit entire regions, adequate insurance pooling requires broad geographic diversification, so that the entire pool doesn’t collapse under the weight of claims from a single event. While a citywide insurance pool can adequately spread property-level risks, such as that from a burst pipe or a slip-and-fall, a pool of this size cannot adequately spread citywide disaster risks.

Second, insurance costs can only be lowered so much without addressing the underlying cause of their rapid increase: the growing scale and frequency of disasters caused by the climate crisis. For this reason, programs such as the ones proposed in New York City must be complemented by a comprehensive strategy to adapt to climate change and mitigate risks. This requires building-level retrofits, but also, for many types of disaster, collective risk reduction at the neighborhood and city scales. This can take many forms, including land-use policies that restrict new construction in high-risk areas, equitable relocation support for people currently living in those areas, and neighborhood-scale fortification measures accompanied by energy efficiency and decarbonization retrofits.

The New York State budget negotiations this year have included serious debate around the rising cost of insurance. Though Governor Hochul’s primary policy proposals have focused on lowering the cost of car insurance, she also proposed some initial steps toward broadening the scope of regulation in home insurance markets. This proposed legislation would:

1. Require insurance companies to provide written explanations—including the causes—for premium rate increases larger than 10 percent or at the request of the policyholder;

2. Establish a benchmark loss ratio for property insurance companies (in a sense, ensuring that companies are not extracting excess profit from insurance plans);

3. Establish “actuarily appropriate” rate reductions for homeowners who make improvements to their home that materially reduce the risk of property loss or damage (such as fire or theft protection, or home-hardening measures).

4. Require insurers of multi-unit dwellings to submit annual publicly-available reports to the New York State Superintendent of Financial Services in coordination with the State’s Department of Homes and Community Renewal, thus allowing the Department to assess whether rates exceed the costs of providing insurance.

Governor Hochul has also proposed bringing together industry leaders and other stakeholders to advise on a longer-term plan for stabilizing property insurance markets. While these measures are laudable and worth adopting as first steps, they will not fully address the market failure at the heart of the home insurance crisis in New York. The proposals do not eliminate the profit-protection tradeoff inherent to the private insurance market, nor do they offer any investment in the community-level adaptation measures that will be needed as the environment continues to change.

To address the structural limitations to the Mamdani Administration’s proposed insurance program, we propose a complementary initiative that matches the Mayor’s ambitions: a state-level single-payer natural disaster insurance program.

This insurance plan would provide coverage for all catastrophic disaster events in the state, with every property owner paying a standard rate. The program would be publicly owned and operated, and housed in a new public entity, which would combine catastrophe coverage with collective climate risk mitigation measures. While this ambitious plan would be unprecedented in the United States, New York would be building on successful models adopted in other countries, such as Spain, Switzerland, and New Zealand, that mandate affordable home disaster insurance for all property owners.

Specifically, the proposed program would provide compensation to households and property owners that experience damage or loss from catastrophic natural disasters, including flooding, high winds, severe storms, hurricanes, and wildfires. Coverage would apply up to a defined cap, with the public program covering catastrophic losses while privately provided insurance continues to cover more routine or typical property risks.

What would differentiate this program from existing insurance? Like the City’s proposed plan, this state-level insurance plan would reduce costs by removing the profit imperative from insurance policies, ensure affordability by setting premiums at a standard rate, and guarantee coverage availability. A board comprising state government leaders, community representatives, and advocacy organizations would govern the program. This structure would ensure that decisions about rates, coverage, risk reduction, and resiliency investments are accountable to the people most affected by the insurance and climate crises.

Beyond providing affordable, standard disaster coverage, the program would also reduce the risk of such disasters by designing, implementing, and supporting adaptation and mitigation work across the state. This would include programs to proactively retrofit existing buildings and carry out community-level risk mitigation, such as sewer upgrades. It would also include updating building code and zoning rules for housing to limit the construction of new buildings in the riskiest regions, such as coastal zones and other flood-prone areas. And it would fund and guide proactive relocation programs to help New Yorkers get out of harm’s way.

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Many of the ideas described in this proposal have been developed through an ongoing effort by the Climate and Community Institute (CCI). While the insurance crisis of the past five years has made the need for reform more salient, the reality is that people and families have needed protection from climate-related damages for decades, and policymakers remain far behind in responding to the scale and urgency of that need.

The Fiscal Policy Institute will be joining with CCI to propose legislation in New York that would establish the public single-payer natural disaster insurance described above. While the costs of insurance and climate change adaptation do not always receive budgetary attention commensurate with their urgency, these are some of the most severe and acute fiscal issues of our time.