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There’s a new sign that our changing climate is causing unprecedented risks: Insurance companies are refusing to issue new policies in states that have been hard hit by extreme weather, including wildfires and hurricanes, both of which scientists say are becoming worse as the planet warms.
News outlets in Florida recently reported that more insurance companies had stopped issuing new property insurance policies in February. The Farmers Group cited “catastrophe costs [that] are at historically high levels.” Rising costs for building materials to fix or replace damaged buildings were also a factor.
In the past 18 months, 15 insurance companies have stopped writing new policies in Florida, according to Mark Friedlander of the Insurance Information Institute. They are doing so even though homeowners insurance premium rates in the state are the highest in the country and nearly four times the national average.
The latest news comes as a new hurricane season starts in the Sunshine State.
Several insurance companies have stopped writing new property insurance policies in California, after widespread wildfires caused billions of dollars in damages in recent years. Insurance companies have also left Louisiana and are dropping customers in Colorado.
Earlier this year, the president of one of the world’s largest insurance brokers told members of the U.S. Senate committee that climate change and its consequences were destabilizing the insurance market and would continue to push companies out of high-risk markets.
“Just as the U.S. economy was overexposed to mortgage risk in 2008, the economy today is over exposed to climate risk,” Eric Andersen, the president of Aon PLC, told the Senate Budget Committee in March.
When people who live in flood-, hurricane- and fire-prone areas can no longer buy commercial insurance for their properties, they are not the only ones to suffer.
Many states (but not Maine) have public insurance plans to help. However, these plans, known as Fair Access to Insurance Requirements plans, are now facing instability in some states. While these plans are growing in states that have them as private insurers deny policies, they are becoming unsustainable. After Hurricane Ian, Florida’s FAIR plan has drawn down its reserves and may seek to impose a new surcharge on private insurance policies, which raises rates for all of those with insurance in the state. California’s plan has accumulated a deficit.
There are also federal insurance plans, notably the National Flood Insurance Program. That program is more than $20 billion in debt, most of it accumulated after Hurricane Katrina in 2005. This impedes its ability to help those impacted by future storms, and costs the federal government $1 million a day in interest payments.
Devastating storms and fires have severe impacts on the lives of Americans every year. An inability to insure their homes adds to this harm. A case study of extreme weather in Europe found that those with robust insurance plans recovered more quickly and fully from the resultant damage than those without such plans. This slow recovery can harm entire communities and regions.
If the risks of climate change were not clear, the insurance industry is now ringing additional alarm bells by indicating that the growing losses may soon be too big to withstand.
