For decades, both the federal government and state governments have backstopped the insurance market. In doing so, they serve as “insurers of last resort” for everything from disaster insurance to car insurance to flood insurance, and even for banks facing financial turmoil. However, the California wildfires from earlier this year are an illustration of the crisis facing both private and public insurance carriers.

Why? For starters, many private insurers have pulled out of certain markets – think: Florida due to hurricanes, California due to wildfires, and New Jersey due to the sheer volume of cars and roads there, and thus, a correlating high incidence of thefts, accidents and liability. When private carriers exit a market, the only remaining option for residents of that market are government-backed insurance plans – the “last resort” plans.

Today, insurers like this are some of the largest insurers in both California and Florida, such as the California FAIR Plan and the State of Florida Citizens Property Insurance Corporation, respectively. And too often these types of carriers cannot remain solvent in the face of a major crisis, especially one that impacts thousands of policy holders devastatingly and all at once.

At the Federal level, consider the National Flood Insurance Program (NFIP). The reason the NFIP exists is because commercial insurance carriers specifically exclude the risk of floods. Congress passed the National Flood Insurance Act in 1968 so property owners could insure against this risk. The program, part of our national emergency response apparatus, remains an incredibly important one for the millions of Americans residing on the coasts, near waterways or in a floodplain – and for those who don’t. Last year’s Hurricane Helene impacted seven states, many that rarely see hurricanes. In these states, only 0.8 percent of homes in inland counties had flood insurance.

So what is the government’s role in the insurance marketplace? And how will it change given the recent changes in administration and the increasing risk of climate-related disasters?

While no one knows that answer, it may be imperative to imagine a future where nationalized insurance programs are instead left to the states. The same could be true when it comes to disaster relief. In this potential new reality, states will have to ask hard questions and make harder decisions about how to mitigate or avoid all sorts of risks.

Take flood insurance as an example. In the absence of a federal flood insurance program, states would need to create their own programs. States would need to begin considering what that would look like and how they could acquire the expertise necessary to develop, administer and manage those programs.

Some states may elect not to create flood insurance programs but to instead amend their zoning laws and restrict new construction and permitting in areas that present high flood risks. Some may pull other levers, such as tax incentives for private insurers to offer plans that will undoubtedly come with high premiums presenting a moral conundrum and pitting the haves against the have-nots.

There’s also the question of whether banks would, in the absence of any flood insurance protection, offer mortgages for homes in at-risk areas. This would upend real estate markets and people’s personal finances alike, reshaping communities from coast to coast and everywhere in between.

Of course, things will probably land somewhere in the middle. The changing climate and the challenges confronting insurers are likely to bring about a market correction that many economists say is long overdue.

Whatever the future holds, it will require leadership, partnership and making smart use of the rapid advances in technology like AI/ML and predictive analytics. Going back over three decades, GDIT has worked with the Federal Emergency Management Agency (FEMA) to help the NFIP fill this need for American property owners, witnessing the evolution from map rooms with giant, wall-sized paper maps to the digitization and dimensionalization of those same maps. We have helped the NFIP leverage technology, analytics and data management in ways that dramatically improved policyholders’ experiences with it.

The program’s next evolution may be one where it moves from a federal program to a state one; or from a program that looks like the current one to one that is more reflective of our changing landscape, literally and figuratively. It may not even change at all, being that it fills such a critical, national need. Regardless, as governments attempt to navigate this new reality, they need trusted partners and commercial technologies that deliver – and they have them.