Today's family offices know they face a growing list of climate-related risks. From catastrophic wildfires in California to severe wind and hail events across the Midwest, losses are increasing at an unprecedented scale. According to Aon's 2026 Climate and Catastrophe Insight, the Palisades and Eaton Fires were the costliest events of last year at $58 billion, while severe convective storms – associated with thunder, lightning, heavy rain, hail, strong winds and sudden temperature changes – resulted in the highest aggregated losses at $68 billion. While no hurricanes made landfall in the United States in 2025, the previous eight years saw an average annual economic loss of over $75 billion from named storms.
In high-threat zones, rising insurance premiums and shrinking coverage options are making it more difficult for family offices to rely on traditional risk transfer alone. While awareness of climate risks and their related coverage issues is widespread, the real challenge is to move into strategic action. A clearly defined risk philosophy can help lead the way.
What is a risk philosophy?
A risk philosophy defines how a family approaches risk tolerance, risk transfer, and risk mitigation across their portfolio of assets. It guides decisions around deductibles, insurance structures, and capital investments in property protection.
The value of a risk philosophy
While the insurance market is starting to soften, property owners in some regions are seeing a 20% increase in premiums based on the individual characteristics of the location. Family office managers reviewing their insurance spend are seeing a clear and significant upward trend with premiums.
Coverage options are also becoming more limited. In regions prone to wildfires, hurricanes or severe convective storms, insurers are pulling back. Limits are declining, and deductibles are increasing – or insurance carriers are exiting these locations altogether. This has prompted family office managers across the country to consider the question: What can we do to better manage and mitigate these growing risks? A thoughtful risk philosophy can help answer that question.
How to design a risk philosophy
Every family will have their own risk philosophy and tolerance. For some, this means prioritizing lower deductibles on primary or high-use properties. It could also involve taking a self-insured approach for certain properties, redirecting savings into resiliency strategies. Ultimately, it is a balancing act that comes down to determining what matters most and applying that perspective consistently across a family's property portfolio.
That consistency is key, especially for family offices managing multiple homes. However, a strong risk philosophy is not rigid – it should allow for nuance and evolution. For example, a portfolio of houses may generally favor higher deductibles, but a single property located in a high-risk wildfire or hurricane zone might warrant a different approach. In that case, a family might take the self-insured route and invest more in mitigation. It all comes down to each homeowner's unique risks.
Depending on a property's location, there are many different strategies a homeowner could put in place to help improve resiliency. In coastal flood-prone areas like Florida, this may include evaluating elevation, improving drainage and installing flood vents. In wildfire-exposed regions like California, creating defensible space, installing ember-resistant vents and adding roof sprinkler systems can all help reduce risk.
Conclusion
Building a risk philosophy is not a one-time strategy. Risk is dynamic, and both environmental conditions and the insurance market continue to evolve. It is important to re-evaluate risk philosophies annually and think about what can be done differently to help make a property more resilient.
For family office risk managers, staying ahead of emerging risks and solutions is essential, and a clear risk philosophy can inform a more strategic approach. If you are not already having these discussions with an advisor, now is the time.
This article is provided for general purposes only and does not provide individual advice. This article should not be viewed as a substitute for the guidance and recommendations of a retained professional. Readers should seek advice from their own qualified professionals before making decisions based on this article.
