Smith Expert Focuses Maryland Officials on Climate-Driven Insurance Crisis

Extreme climate events, like the recent Los Angeles-area fires, are “happening with frequency and severity that we haven’t seen before, and insurance companies simply aren’t able to keep up with the pricing of it,” said risk management expert Clifford Rossi of the University of Maryland’s Robert H. Smith School of Business recently to Maryland officials.

Speaking before the Maryland General Assembly's House Environment and Transportation Committee on Jan. 21, 2025, Rossi added: “Therefore, we have had market failure, and the [subsequent and proposed] responses you’re probably hearing and reading about all have been piecemeal solutions to a much bigger problem across the country…I hate to say it this way, but we're kind of like a frog in the proverbial pot while it's boiling.”

Rossi, professor of the practice, executive-in-residence and director of the Smith Enterprise Risk Consortium (SERC), described the crisis in the context of homeowners’ insurance, its affordability and availability and laid out a proposed, long-term solution: a private-public solution via a federally chartered National Hazard Insurance Corporation (NHIC). He’s previously detailed the concept both in a recent Federal News Radio interview and a recent op-ed in which he noted “state-run insurance programs of last resort are financially unstable mechanisms ill-equipped to handle any acceleration of natural disaster risk.”

The NHIC would be adopted through Congress “as a GSE (government-sponsored enterprise) that's been capitalized appropriately to take that risk on much like Fannie Mae and Freddie Mac do for credit risk today in the mortgage business.”

View Rossi’s recorded presentation (starting 2:14:50) from the House Environment and Transportation Committee briefing (entire agenda), and read Rossi’s recent ‘Blueprint For Solving The Homeowners Insurance Crisis’ guest column for Mortgage Banker Magazine.