Climate Crisis and Insurance rates

As more frequent and extreme weather events occur because of global heating, insurance rates will inevitably rise. Some insurance companies are already having to file for bankruptcy.

Read a roundup of the headlines below:

”From massive wildfires to turbocharged hurricanes, disasters linked to climate change are racking up billions of dollars in damage across large swaths of the country, and insurance companies are struggling to keep up.

State Farm, the largest property insurer in California, announced on Friday that it would no longer write new policies for homeowners or businesses in the state due to the high wildfire risk, writes Thomas Frank…

It’s not just California. Across the country, in states like Louisiana, Colorado, Florida and Texas, property insurance systems are collapsing under the weight of climate change — even without statewide limits on rate increases.”

Politico, Climate-fueled insurance crisis hits California

“Climate change is starting to impact Americans in their wallets. As global warming-related weather events surge across the United States, property insurance premiums are anticipated to more than double.

Global warming-related events can be anything from tropical storms to wildfires or flash floods. Even if people in the affected areas make it to safety through evacuation, one of the biggest impacts is property damage or loss. A recent United Nationsanalysis shows that somewhere in the world, there is an extreme weather event or climate disaster occurring every day. The occurrences have seen a five-fold increase over 50 years.

Jason Thistlethwaite, a professor for the School of Environment, Enterprise and Development at the University of Waterloo, told Newsweek that insurance premiums, specifically those for property insurance, are bound to increase in response.”

Newsweek, Climate Change Is Costing Americans as Insurance Rates Headed for a Spike

“The president of one of the world’s largest insurance brokers warned Wednesday that climate change is destabilizing the insurance industry, driving up prices and pushing insurers out of high-risk markets.

Aon PLC President Eric Andersen told a Senate committee that climate change is injecting uncertainty into an industry built on risk prediction and has created “a crisis of confidence around the ability to predict loss.”

Reinsurance companies, which help insurers pay catastrophic losses, “have been withdrawing from high-risk areas, around wildfire and flood in particular,” Andersen told the Senate Budget Committee.”

Scientific American, Climate Change Is Destabilizing Insurance Industry

“When Hurricane Ian pummeled Florida last week, it left a stunning trail of physical devastation in its wake. Entire neighborhoods vanished beneath water, cities were shredded by 150-mile-per-hour winds, and thousands of people lost their homes overnight. 

Though the storm has since dissipated, it will bring even more turmoil to the Sunshine State in the coming months — but this damage will be financial rather than physical. Ratings agencies and real estate companies have estimated the storm’s damages at anywhere between $30 and $60 billion, which would make it one of the largest insured loss events in U.S. history…

Home insurance costs are poised to skyrocket for all Floridians — not just those who live in the places most vulnerable to major storms. The state will be forced to impose new taxes and penalties as it tries to keep the market afloat. New burdens will fall largely on low- and middle-income homeowners. For many working class Floridians, homeownership may become impossible to afford as a result.”

Grist, The ‘hurricane tax’: How Ian is pushing Florida’s home insurance market toward collapse

“Tens of thousands of people are scrambling for homeowners insurance in Louisiana at the peak of hurricane season after recent storms drove their carriers out of business. The crisis has sent insurance prices soaring and stoked fears that the Gulf Coast will grow too expensive to inhabit as climate change fuels more destructive weather.

Homeowners in some disaster-prone areas, including New Orleans, are seeing their premiums double, with some required to pay an extra $3,000 per year. That is on top of a steep rise in the cost of everyday goods, from groceries to gas, as well as energy bills and flood insurance.”

NBC, Louisiana faces an insurance crisis, leaving people afraid they can’t afford their homes

“I learned that my insurance company was filing for bankruptcy too late on a Friday to do anything about it, so I called my insurance agent first thing the following Monday morning. Her response, delivered politely and compassionately was effectively, “get in line.” She was dealing with the fallout from two other companies that were declaring bankruptcy, and their customers had to be addressed before the end of the month. My company was not canceling policies until the middle of the following month, so I had a little time on my side. 

I am not alone in this insurance debacle; my insurance company was the seventh company to declare bankruptcy in Louisiana this year. While insurance is a complicated industry, with actors that range from individual ratepayers to local regulators and international reinsurance companies, one item stands out in this episode: climate change.”

The Hill, A new storm is brewing in struggle over climate change: homeowner’s insurance

More Reading:

• CBC News, Extreme weather causing billions of dollars in damage, driving up insurance premiums: StatsCan

• Insure Our Future, Chubb Becomes First U.S. Insurer to Limit Insuring Oil and Gas Extraction Projects but Falls Short of Aligning with Climate Science

• The Conversation, Why insurance companies are pulling out of California and Florida, and how to fix some of the underlying problems

• Bloomberg, Louisiana Insurance Market In Crisis From Climate-Fueled Storms

• Grist, Climate risks place 39 million U.S. homes at risk of losing their insurance