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Hazard mitigation is a valuable tool for reducing the damages to residential properties that may result from catastrophic events, such as hurricanes. Because of the upfront costs associated with retrofitting buildings to protect against loss, incentives are often used by insurers and policymakers/regulators to promote mitigation on existing structures. These incentives may include, inter alia, tax credits and mitigation grants or financing assistance. Property insurance premium credit programs, which are intended to reflect reductions in expected losses achieved through property improvements, do not exist solely as mitigation incentives. Nevertheless, insurance premium credit programs may be the most influential of all the mitigation policies on individual property owners’ choice to fortify existing structures, primarily due to the immediate savings that can be obtained via the reduced insurance premium.

This paper examines insurance-related public policy for the promotion of hurricane wind mitigation, and specifically compares and contrasts the strategic intent and implementation of such policy, as well as the performance of the insurance markets impacted by these policies. Limited policy success and unintended consequences may result from a non-optimal strategy or an improperly implemented mitigation premium credit program. Our work focuses on property insurance-mitigation programs in two states: Florida and Mississippi. Both states utilized loss relativity studies to implement insurance discount programs, yet with strikingly different approaches. Our analysis does not indicate that either program has experienced full participation by homeowners via actual mitigation activity. The striking contrast in outcomes lies within the insurance marketplace, both private and public. While no evidence exists that the Mississippi wind insurance discounts have harmed the state’s market for residential property insurance, the Florida program correlates with poor market performance despite a lack of hurricanes in the intervening years.