Building Resilience: From Rooftops to Results

Pete Miller [00:37]

Today we’re joined by Roy Wright, President and CEO of the Insurance Institute for Business & Home Safety.

As a former FEMA executive who led the National Flood Insurance Program, Roy now heads a scientific research organization that’s revolutionizing how we build and protect homes against natural disasters.

In this episode, we’ll explore the remarkable success of the FORTIFIED building standard, which has transformed coastal resilience in Alabama and is expanding nationwide.  We’ll also discuss IBHS’s work on wildfire protection and the challenges of turning cutting-edge research into action at the community level.

Roy also shares other ways that IBHS is working on behalf of insurers to provide practical, science-based solutions for improving resiliency against severe weather and natural disasters.

Roy, we’re very interested in the success of state programs to provide homeowners with a grant to make their roofs more secure. know IBHS FORTIFIED Standard is a key part of these state programs. Can you tell us how this collaboration with states like Alabama got started, how it gained traction and has it expanded?

Roy Wright [01:54]

Yeah, so FORTIFIED was created inside of IBHS at the behest of property insurers who said, can you build a house that is eminently insurable? Give us that perfectly insurable house. So FORTIFIED had its first generation played out in 2010. And in its first few years, it was pretty narrowly applied. It was actually a version of a truly perfect house and dozens made it across that finish line.

As the program evolved, in the mid teens, it took on three levels. A gold level, which can only be done at the point of new construction. And it’s in a beyond code way by which you can withstand wind, particularly withstand winds up to 135 miles an hour. A silver level, which doesn’t have all of those pieces, but deals with the roof as well as all of the openings, and then the FORTIFIED roof designation. And the FORTIFIED roof is the only one that can be done on the retrofit side of the equation.

And so we were partnering with folks along the Gulf Coast about where do you go with this program? And Alabama was putting the pieces in motion. They’d experienced Hurricane Ivan back in 2004. They said, hey, we don’t want to have this happen again. And as those years played out, they said, we want something that makes sure that our homeowners can withstand the storms that are going to come our way.

For a FORTIFIED roof, there’s a presumption that in the highest wind events, you’re going to lose your asphalt shingles, you’re going to lose your roof cover. An insurer would prefer not to have to pay for another roof, but they’ve priced that in, they’re expected to fulfill their contract. But we needed to keep the water intrusion. So underneath those shingles is four by eight sheets of plywood. And those cracks are all there for expansion reasons given heat. But if you lift up the roof cover, water comes in. So in the average home in the Southeast, one inch of rain for an hour produces nine bathtubs full of water being poured throughout the house.

When you have that kind of water intruding in, it’s a three to seven times multiplier on the claim, right? If you just lose your roof cover, you can put a blue tarp on that and you can live in your house while it goes through repairs. If you’ve got water intrusion, you’re moving out. You don’t have another choice in that.

And so FORTIFIED roof has really become the mainstay. We’ve got more than 70,000 designations now in FORTIFIED and more than 50,000 of those are roofs. And those roofs can play out at the point of retrofit. And that’s what has become, I think really become so attractive.

And we’re seeing it across some states that, yes, Alabama, which we should dive into, but Louisiana, North Carolina, South Carolina, we’re seeing places like Mississippi, Minnesota, and Kentucky really begin to lean into this space. I think what’s really happened though is we watch the impacts of Mother Nature. These storms keep coming.

From a climate perspective, we’re seeing more intensity, more rainfall in those moments. And those storms come with a lot of wind. We’re seeing that kind of uplift. 107 insurance companies pay for this research to happen and then to serve it up to the public. So FORTIFIED’s probably the most beautiful example of don’t just research and do the cool stuff that goes on inside the test chamber, which really is cool, but translate that to the point of action so that we narrow that path of destruction.

That’s what’s so beautiful about what FORTIFIED offers. And it offers something that just doesn’t happen at new construction, but happens at the point by which someone is just going through a standard re-roof on their house.

Pete Miller [06:17]

Really is a great program, just for a commentary. I mean, I’ve researched that myself and seen some of the things you do. It saves lives, so that’s pretty neat, beyond even property. So let’s just dig into the Alabama program a little bit. Can you just give us some of the key elements that have made that so successful?

Roy Wright [06:38]

Yeah, so Alabama is the national leader on these issues related to wind resilience across the country. I talk with state insurance commissioners in different states and they’ll point to goes, know, Alabama wasn’t the first thing that came to mind. But as soon as I did some research, Alabama’s the leader. I need to replicate what they’ve done. And Alabama’s done four things and we need to understand that they’re their leadership includes all four.

First of all, for those two coastal counties, Baldwin and Mobile County, they took these elements of FORTIFIED for new construction as well as retrofit, and they put them in their code. All new construction starts by meeting that baseline. Secondly, there’s a deep partnership with the building community. The developers have not just been on board, they’ve been advocates. They actually did a study about five years ago to show that when you had a FORTIFIED home, it increased the value of the home by 7%. Home builders saw this as value generating.

The third piece was the insurance department said you’ve got to put a price consideration on this.

You’ve got to make sure you put a reward back in place for this. companies are a bit slow before they just want to dive into that. And on this one, it’s actuarially sound. It’s what’s driving it. They’re seeing the loss ratios go down in these events. And the fourth dimension is a grant program. A grant program that will help those who are reroofing by giving them the first $10,000 toward their reroof, presuming that it is a FORTIFIED roof.

We’ve seen states that take just one of the four dimensions, a state in middle of the country that passed mandatory discounts on FORTIFIED some six years ago. And five years into it, they had 26 designations. The discount wasn’t the driver. You needed to pull all four pillars together. And this is a place that Alabama really has. you know, I always want to see is the private sector generating? Is there a flywheel on that side of the equation? So, Alabama has more designations than the other state, 50,000. Seventeen percent of those are driven by grants. The other 83 % is just the marketplace going to work. That’s resilience at scale because others are trying to glob on and create grant programs and the like, and that’s a good thing. It’s even necessary as a catalyst, but it will be insufficient. It will be insufficient to just stand up a grant program.

You can put a grant program up, hey, there’s $5 million towards this, you know, and there’s going to be a handful of homes that are helped. And for those families who get the grant, it is a win, no question about it. But you haven’t actually bent down the risk curve. And so we see in the case of Alabama, you 30 plus percent savings on wind premiums, and it’s being backed up by the loss ratios in that space, driven by experiences with events. And so, you know, as Ivan been back 2004, they kind of drove this Hurricane Sally marched right over these homes and they saw a reduction in claim frequency. They saw a reduction in claim severity.

And it was the severity piece that was particularly meaningful because, yep, still trees are going to fall. There’s going to be claims. It doesn’t just eliminate it, but it addresses that severity dimension.

It’s a piece that is now, know, others are trying to replicate. Louisiana is hot on their heels. We want, we need to do this. They’ve got their own insurance volatility. Frankly, North Carolina has been leading in this space. In that case, it’s the wind pool. They looked at it and says, we’re just seeing a reduction in claim frequency and severity, and it’s saving them money on their reinsurance. These are investments that truly hit a flywheel and become self-propelling. That’s winning.

Pete Miller [11:19]

Yeah, it’s interesting. The University of Alabama has a pretty good insurance program and a friend of mine is a professor there. And we got to talking about the great work that IBHS has done and showed me pictures of coastlines sort of before FORTIFIED and after. And, you know, the number of structures standing and undamaged was quite stark. It’s quite a testament to how effective that program is.

Roy Wright [11:50]

I was in the field after Hurricane Sally and there was a reporter with me. It was still during the height of COVID, so everyone’s wearing masks, all these kinds of pieces. And we got out of the truck and we’re walking there and I’m saying, well, this one’s FORTIFIED. This one, how do you know which ones are FORTIFIED? And I said, I’ve color coded them for you. She looked at me and you can just see through the eyes. You can’t see the full face. And I go, the blue tarps? They’re not FORTIFIED. Right? And it had in that point, know, the FORTIFIED ones were younger roofs, they were newer, the installation quality had gone up and the ability to withstand water and avoid water intrusion was right at its face.

Pete Miller [12:40]

And people’s lives are less disruptive and better. It’s a win-win-win, right? mean, everybody wins at that. So that’s pretty neat.

Roy Wright [12:49]

Anyone whose family who’s had to use the additional living expense coverage and live in the 600 square feet Residence Inn for eight months will tell you they much prefer to never use that coverage.

Pete Miller [13:04]

So what is the next frontier for IBHS in terms of expanding adoption? And you mentioned a couple states are looking at it for, you know, for these building standards.

Roy Wright [13:12]

Yeah, so inside that wind and really severe convective storm hurricane space, North Carolina is absolutely accelerating forward on the FORTIFIED side of the equation. Louisiana, after they have Laura, Delta and Ida, the state legislature increased their building code, put a grant program in place, is driving the building development side. And we’ve seen them go from a handful of designations to about 2,500. And I think that’s just going to continue to drive up. It’s going to take a while for that to get all the way back into the insurance marketplace that I think that Commissioner Temple is really trying to solve for But resilience is one of those elements and he’s he’s putting that in place

We’re now seeing inland states. So Minnesota, Kentucky, are now in a place where they’re looking at not just wind but the hail dimensions of it as well. And so there’s a FORTIFIED high winded hail which includes an impact rated shingle there. Again, it doesn’t mean there’ll never be hail damage, but we’re trying to eliminate one of the cycles for replacement that sits on that side.

I think for us, as we work with insurers, they’re seeing this value. The loss ratios are meeting expectations in ways that give people a lot of confidence. And so property insurers look to me and says, okay, I’ve got another existential crisis for you. Wildfire.

And so we’re taking this same mindset and there’s a program that is now established active now in both California and Oregon and growing into some other states called Wildfire Prepared Home. And the Wildfire Prepared Home, two levels of it. There’s a base level that can be done from a retrofit.

Wildfire Prepared Home Plus that’s almost always just done on new construction. That’s taking the best in science at that base level. It’s defensible space the five feet closest to your house. It’s the attic vents. It’s the way that gates come up and burn your home It’s the landscaping pieces in the adjustments that need to be made so you can defend against embers and the ember attack that drives so many ignitions.

At the plus level for new developments and here this fall there’ll be an announcement a couple of builders large national builders that are playing out in Southern California they’re committed to build everything in their new subdivisions at wildfire prepared home plus. So ember attack as well as the whole envelope being non-combustible materials. It doesn’t mean that wildfire can’t get there. We can still have because of the spacing of homes often they’re very close together and if one of them catches you can begin to see that domino move through but can we again narrow those impacts and avoid that conflagration. It’s always awful when we lose a few dozen homes, but the market can handle that and I think you can rebuild well. When you lose thousands of homes, you hit that point of conflagration, you have an existential crisis, yes, on the economic side for the insurers, but you also have an existential crisis for those in the community.

because building back is so difficult and such a long road.

Pete Miller [17:04]

So there’s two designations we just talked about, right? FORTIFIED and the home or the wildflower prepared home. I’m curious, Roy, what each of these is based on research and testing done by IBHS. And you certainly have an extensive testing capability and cool facilities I might add. So what are some of the new learnings about mitigating wildfire risks that are built into the wildfire designation?

Roy Wright [17:33]

Yeah, so wildfire at a community-wide destructive level is relatively new. It’s not that, you know, we had conflagrations 100, even 300 years ago. They were all in an urban context, right? It’s the great London fire, the Chicago, Boston, San Francisco kinds of pieces. And we learned how to build and put fire suppression in places so that we can avoid that conflagration. We now have that challenge in front of us on the wildfire side.

And while there have been a handful of conflagrations over the last couple of decades, really was the ones that played out in 2017 and 18 in California that were game changers for the industry and for communities. We had already been doing work on wildfire going back to 2012. And when those two events played out in 2017 and 2018, I had member companies as well as folks across the fire services going we are so glad you’re doing this work. We may have forgotten about it before that but now that we are so glad you’re doing this work so we do work in our lab, and as you mentioned, we do everything at full scale. So full scale structures, we deal with winds up to 135 mile an hour on the hurricane side, on the wildfire side, ember driven pieces done at full scale, we can control the wind in those kind of dimensions. It’s a unique testing facility that isn’t replicated anywhere else in the hemisphere. But we pair that then with what we can see after the fact. What we can go see on the ground after conflagrations.

And so we’re a little a year past the Lahaina fires from Maui. And what really became crystal clear to us out of the Lahaina was yes, building materials matter. And so we had seen that already in the lab at other events. The density of structures, how close they are together matters a lot. And the connective fuels. And we had studied a good bit about the connective fuels, but I got to tell you as we walked through Lahaina, it was in stark relief. Some of this is about what’s built around you, right? So this is the connective fuels are the things that can catch fire and then connect up to the structure, right? And we watched this play in terms of people’s trash cans and storage bins. We watched this in terms of people’s fencing. We watched this obviously from the landscaping side.

And we watched how cars acted as connective fuel because the cars were actually highly flammable. The structure was otherwise withstanding the embers okay. And then the car caught on fire. The heat busted through the window. Something starts melting on that and you’ve got an internal combustion engine and all of a sudden this thing’s fully engulfed and that fires right next to your structure. Well, if structure’s going to catch, when the structure catches, the structure starts producing the embers that throw themselves forward.

And so our work from Lahaina and what’s frankly on the on the testing pad right now are working with accessory dwelling units and other homes next to full-scale homes and looking at the spacing, looking at the fuel construct in that structure to structure building to building space

Because inside the property insurance world, that’s the piece that feels existential, that conflagration piece. And so in the California context, which has a lot of complexities in its market, and I’ll let someone else speak to all of the regulatory realities that make it so hard, once companies can get to rate adequacy, there’s still a very real set of issues related to

Related just to the wildfire risk itself. People have to have a place to live. There’s a lot of homes there, 40 million Californians. What do you do? And I think this is a place where we’ve had to work with public policy leaders And make sure that you know, you can’t out of one side of your mouth say that climate change is making things worse. And now the other side of your mouth says so everything should be cheaper now. Climate change has a price. And we’re seeing that play out now, right? We’re seeing it out West in the wildfires, in the wake of Helene in recent weeks. We see this in the Southeast where wind had a profound impact on the panhandle of Florida. 10 years ago, they would tell me hurricanes can’t hit the panhandle. It just doesn’t happen. Well, we had Michael and now Cat 5, now we have Helene a Cat 4.

But you know what’s even more profound to me? Georgia, in the last six years, has experienced two hurricanes that didn’t hit their coast. This was not the Savannah, Atlantic side of Georgia. It plowed through the panhandle and was still at hurricane strength winds in the southern part of Georgia. And so there’s these pieces where our research, wildfire out west, although frankly we have wildfire issues even in the Appalachians here in the eastern part of the country, And then what we see on the wind side, where, how does this stuff march through? What impact does it have? Our research is what can we do in the lab? And then how can we meet it in terms of what happens in the field and along the way? Can you help folks get farther down the road?

You’ve been hosting Predict and Prevent for a while. We can predict where people are going to be impacted, which hazard, which risk is coming their way. We still have a very big gap in getting consumers willing to take the actions to prevent or at least narrow the impact of these storms on the way in. I actually think that’s our biggest lift right now and it’s the biggest challenge in front of IBHS that don’t just do great physical science, see it all the way through so that you can nudge consumers into the actions that they need to take.

Pete Miller [24:53]

So let me just ask a question then on the wildfire prepared home program. mean, you pointed out that Alabama was a real sort of exemplar of FORTIFIED. Is there an equivalent sort of champion, if you will, of the wildfire home prepared home program?

Roy Wright [25:12]

Yeah, so I think California will be that. It’s still early in the program’s adoption. As I mentioned, there’s other complexities in terms of rate adequacy in the state. But when California Department of Insurance was putting the regulations in place related to wildfire mitigation,

They coordinated very closely with us to use our research for it’s safer from wildfires program. And then joined us when we’ve done some live wildfire demonstrations in Southern California, Northern California. The insurance commissioner stood next to me and talked about the impact and why this is necessary. I’m seeing champions like Habitat for Humanity, Habitat’s doing quite a bit of work in Butte County, they’re around Paradise where the Camp Fire played out. They made a commitment that every new home that they built will be a wildfire prepared home plus.

California is a big place. California is a complex place. Oregon, Colorado, New Mexico are all working closely with us. Which one of those four or five states will become the Alabama equivalent? Give me another 18 months and we’ll see who’s racing to the finish line. Where we stand today, California’s farther ahead. Let’s see if they can remain committed to good science on the ground as it moves forward.

Pete Miller [26:50]

Just on a personal note, I would nominate Arizona, Roy because I spend a lot of time in Scottsdale and I cannot tell you how often I see the tankers go back and forth to the wildfires.

Roy Wright [27:04]

So there’s been conversations just in the last month talking with the Arizona Insurance Department. So anything’s possible. Here’s what I’m really hoping for, is that we can get state and local leaders leaning into doing the right thing without having a conflagration first. If there is one, people come back around. I get that. And, we won’t miss those marks, but boy, what I wish we could get ourselves to a point by which we could be implementing the right things, not because we lost 5,000 homes, but because we wanted to avoid losing 5,000 homes.

Pete Miller [27:54]

One of the things that is a local phenomenon, as I understand it, is building codes. You mentioned a little bit earlier, but what is IBHS doing in that area to help influence stronger building codes?

Roy Wright [28:08]

Well, building codes are absolutely essential and they’re essential because we need to deploy what is known about the engineering sciences to avoid future catastrophes. Now, we got to hold this in its relative content. 99 % of Americans live in a home that’s more than 10 years old. And so,

we spend a lot of time on retrofit for a reason, because that’s where most Americans live, but we’re building housing for the next 40 million Americans. We’ve got choices to make. And this would be just actually one the most disappointing things for me. Building codes, building science has all originated here in the United States. International Code Council based here in United States. And…Only 35 % of US jurisdictions have a current code. That’s enforced. Two thirds of American communities, man, don’t know how direct I want to be about this. Two thirds of American communities have made a choice to ignore meeting the basic needs.

There is a better path. We know how to build in ways that are safer and more durable. And two thirds of American communities aren’t there today. Now, I’ll tell you, the insurance companies recognize where the building codes are current and enforced, and it’s reflected in their prices, as it should be. And we’re going to keep doing our work inside IBHS on both wind and rain, well as, as wildfire and making sure that the best science is in place. but there’s a lot of lifting to do. You know, we, we published something called Rating the States, you know, Google it, IBHS rating States to pull it up every three years where we take the hurricane prone States, the 18 and they get graded based on building cone adoption, enforcement and contractor licensing.

And there’s been some good movement, right? Some people get nudged along the way. But we have a long, long way to go. And so what does IBHS do? We do two things. A, we make sure our science gets inserted into the consensus process.

And secondly, we offer programs like FORTIFIED and Wildfire Prepared Home so that communities that may not be doing everything they should on the code space can provide builders and home builders, homeowners with a pathway that goes, this is what you can do. You can do it in a way that’s going to be verified as it goes forward.

Pete Miller [31:00]

Obviously there’s been a rise in catastrophe losses and you mentioned differential pricing by building codes and other things. Are consumers more aware of the need for resilience? And do you find them taking steps to mitigate risks or maybe not so much?

Roy Wright [31:18]

Obviously there’s more information available now than ever before. and information is necessary, but insufficient. And I do think that convincing people to do something is, is our biggest challenge. I think most folks start by saying it will never happen to me. That’s their mindset. And it will never happen to me is in place of what really should be taking place from a risk perspective. What can I do to be prepared? Right. and so I think it is our mission to take the research that has played out, in our space across the property casualty industry and put it in the hands of home and business owners, let them know that they’re, they’re not powerless.

But fundamentally Pete, it’s a failure of imagination. You look at the impact of Helene. You know, it hit Florida. People go, yeah, hurricanes in Florida. They don’t think hurricanes in South Georgia. They don’t think tropical storms, winds, and profound flooding all the way up into the Appalachians the way we saw with Helene.

There were some saying that Asheville was a climate island. was like the apex. That’s where you should go. Except, you know, this kind of catastrophe was within our ability to imagine. There were actions we could take. And I think that’s our opportunity. And I might as well as far as to say right now it’s our failure. That we haven’t gotten folks farther down that road.

To take what we can predict inside the industry and get consumers to take the actions to prevent on their side Sometimes it is they don’t know what to do. Sometimes it’s they don’t have the money and other times It’s I much prefer to spend my money elsewhere. Right, it may cost you an extra thousand bucks at the point of reroofing to have a FORTIFIED roof. It may cost you three or $4,000 to change your landscaping on a wildfire prepared home. And if you’re sitting over dinner talking with your family and goes, we can upgrade the roof or go to Disney World. And I know which one wins.

Pete Miller [33:56]

Roy, you’ve done an amazing amount of work, and what is next on IBHS’s docket?

Roy Wright [34:05]

Yeah, clearly we’ve talked about wildfire and FORTIFIED. I’ll tell you the piece that insurers occupy their conversations with me the most about is roofs. Roofs generally, yes, we’ve got a FORTIFIED approach there, but they want a better pathway to predict how long it’s going to last. What’s the length of durability we should expect on a tile, on a metal, on an asphalt shingle, on a composite? And so, the work that’s deep in the new science space for us at IBHS that will flow out in 2025 and into 2026 are a set of roofing roadmaps that clearly show the industry on the insurance side, but ultimately consumers, what should they expect?

Particularly with asphalt shingles, they expire. And that expiration date has a lot to do with the sealant underneath you can’t see, and has nothing to do with that number that was on the packaging when you bought your roof. That number is perfect. As long as there’s never a bad weather day. Because none of the roofing warranties apply if there is a bad weather day. And so the work front and center for us right now is to take what we’ve learned about roofs at five, 10, and 15 years old across these pieces and serve up to the property insurance industry a much clearer set of insights so that they can predict the durability, predict the expiration that’ll ultimately affect products and how people, package things up for consumers. I think ultimately, in much the same way we’re trying to get a consumer to change what they’ll invest in, related to mitigation, we need to change their expectations on what they should expect related to their roof. It’s more akin to tires on your car than anything else. It has to be replaced.

Pete Miller [36:20]

Well, this is timely for me, Roy, because I just called a roofer because my roof is getting at the end of its life. So I would be very, as a consumer, that’s very interesting information.

Roy Wright [36:32]

We will get you some great content on where to look and make sure you put a FORTIFIED roof on there that’ll protect you and your family going forward

Pete Miller [36:42]

I definitely will. Thanks, Roy. I appreciate it very much. Very, very much.

Roy Wright [36:46]

Always good to be with you.