Historic $600 million insurance innovation links storm-resilient construction with financial markets

A UNC School of Law professor has helped design the world’s first catastrophe bond that rewards climate resilience. This groundbreaking $600 million insurance-linked security is transforming the way insurers and investors manage climate risk.

On Friday, October 24, the University of North Carolina at Chapel Hill will host a conference bringing together leaders from the insurance, finance, and academic sectors to share the inside story of how the bond was created and what it means for the future of climate resilience.

Professor Donald Hornstein, the Thomas F. Taft Distinguished Professor of Law and newly appointed Director of the UNC Law School’s Center on Climate, Energy, Environment, and Economics, played a pivotal role in designing and securing the NC Insurance Underwriting Association’s (NCIUA) historic Resilience Catastrophe Bond.

The $600 million bond, nearly double its original target of $350 million, provides additional protection in the event of a catastrophic loss across North Carolina’s 18 coastal counties. It also funds the expansion of NCIUA’s nationally recognized resiliency programs, which help homeowners install FORTIFIED roofs that can better withstand severe storms.

In May 2025, Artemis, the leading international publication covering the global insurance-linked securities and reinsurance markets, described the NCIUA’s bond as “breaking new ground” as the first in the world to combine traditional catastrophe protection with a resilience incentive. The bond attracted strong interest from global investors.

The three-hour conference at UNC’s Carolina Club, Taking Stock: Climate Resilience and Insurance Finance, will feature presentations from experts who helped design, market, and administer the Resilience Bond, as well as international leaders pioneering new approaches to climate and insurance finance.

The bond represents the culmination of more than a decade of effort. Beginning in 2017, NCIUA launched a free endorsement that provided policyholders up to $5,000 after a claim to rebuild using FORTIFIED Roof standards, engineering specifications developed and tested by the Insurance Institute for Business and Home Safety (IBHS).

In 2019, NCIUA expanded its efforts with the Strengthen Your Roof grant program for Outer Banks and barrier island homeowners, followed in 2022 by a second grant program serving all 18 coastal counties.

NCIUA has invested more than $130 million to support FORTIFIED construction since 2017 through these initiatives, resulting in more than 20,000 roofs completed or in progress, the largest single-insurer resilience initiative of its kind in the world.

Data from the NC State Institute for Advanced Analytics show that homes with FORTIFIED roofs experience 35 percent fewer claims during hurricanes, 23 percent less damage, and claims from non-named storms were nearly two-thirds lower compared to standard construction. These results translate into lower insurance losses, faster recovery for coastal communities, and a more stable market for North Carolina homeowners.

The new bond represents both a financial breakthrough and a continuation of NCIUA’s broader mission to build a stronger, storm-ready North Carolina, said Gina Hardy, CEO of the NCIUA.

“The Resilience Bond is an exciting financial innovation that provides another source of funding for our ongoing investment in coastal resilience,” she said. “It reinforces our commitment to helping homeowners strengthen their properties, stabilize insurance markets, and prepare communities to weather future storms.”

Hornstein’s work on the bond, conducted in collaboration with Carolina Law students, earned the Law School’s Pro Bono Project of the Year award in May 2025.

The journey began in 2008, when the NC General Assembly appointed Hornstein to a study commission examining coastal insurance challenges. His recommendations, enacted in 2009, granted NCIUA clear authority to pursue storm mitigation strategies. Over the next several years, Hornstein, Hardy, members of the NCIUA Board of Directors, and staff developed a comprehensive resiliency program that demonstrated how strategic investments in stronger construction could pay for themselves through reduced claims and lower reinsurance costs. That success attracted the attention of the White House and the World Bank, which invited Hornstein and Hardy to brief their teams in late 2016.

After NCIUA invested more than $100 million and proved the program’s effectiveness, the team began seeking new ways to generate additional funding for FORTIFIED roofs. At that point, they revisited a 2015 academic proposal by Shalini Vajjhala, then affiliated with the Brookings Institution, which explored the integration of resilience features into insurance-linked catastrophe bonds. Her work helped shape the concept that NCIUA and its partners ultimately brought to market. Vajjhala, now Executive Director of PRE Collective, will attend the UNC conference to discuss the evolution of resilience-focused financial instruments.

Between October and December 2024, Hornstein, Hardy, and members of the NCIUA Board of Directors and staff worked closely with Cory Anger of Guy Carpenter Securities and Tom Beckmerhagen, a principal at Hannover Re, to finalize the catastrophe bond’s structure. In February 2025, the team — which included Hornstein; Hardy; Rod Evans, Chair of NCIUA’s Reinsurance Committee; Franklin Rouse, a Board representative from State Farm Insurance; and Alex Garate, a Board representative from Nationwide Insurance — met with investors in London, Zurich, and New York City and conducted virtual meetings with other investors around the world.

Hornstein is a four-time recipient of UNC’s university-wide teaching awards, including the UNC Board of Governors Award for Excellence in Teaching, and an eight-time winner of Carolina Law’s McCall Award for Best Teacher. He also teaches at Duke University’s Nicholas School of the Environment.

UNC School of Law, consistently ranked among the nation’s top public law schools, is committed to excellence in teaching, scholarship, and public service. The Center on Climate, Energy, Environment, and Economics advances legal and policy solutions to environmental and climate challenges through interdisciplinary research and collaboration.

The Resilience Catastrophe Bond embodies UNC’s mission of applying research to real-world challenges, demonstrating how North Carolina’s public universities are helping shape global innovations in climate and insurance resilience.