Five hurricanes made landfall in the United States this year. Damages amounted to $5 trillion. Desolate mountain towns along the east coast were flooded. Numerous wildfires have burned approximately 8 million acres across the country. As such events become more common and more devastating, homeowners are seeing their insurance premiums skyrocket or their insurance companies dropping their coverage all together.
According to an analysis released Wednesday by the Senate Budget Committee. Rate at which insurance contracts are terminated It has increased significantly in recent years, especially in states most exposed to climate risks. A total of 1.9 million policies were not renewed.
“Climate change is no longer just an environmental issue,” said Sen. Sheldon Whitehouse, D-Rhode Island, who chairs the Appropriations Committee. public hearing on the issue Wednesday. “This is an economic threat and an affordability issue that should not be ignored.”
For those who have insurance, Insurance premiums rose 44% From 2011 to 2021, and An additional 11% last year; According to Another report released this week by the Congressional Joint Economic Committee. “The current insurance model is not working,” said a Democratic analyst at the Joint Economic Committee (JEC), who asked for comment publicly on condition of anonymity.
JEC’s report includes a state-by-state breakdown of premium increases and a risk ranking based on the climate crisis. Florida topped the list on both fronts, with annual premium increases of $1,272 from 2020 to 2023. Michigan had the smallest increase, at $136. No state experienced a decline during this period.
“This is not a question of whether the state is red or blue,” the analyst said. “It applies broadly across the country.”
Florida also led the way in terms of nonrenewals, according to a report by a Senate committee that looked at state and county-level data. This rate nearly tripled between 2018 and 2023. Nationally, in 2023, 48 of the top 50 counties with the highest non-renewal rates and 82 of the top 100 counties were flood-prone, at increased risk of wildfire, or It was both.
Disasters intensified by climate change could wreak havoc on the insurance market, forcing insurers and reinsurers, also known as reinsurers, to take on huge debts. “At the end of the day, all of these groups are raising prices and ultimately they have to pay,” said Philip Mulder, an economist and risk and insurance expert at the Wisconsin School of Business. It’s the homeowners,” he said. he was Co-author of state-level dataset It helped support JEC’s activities.
Not everyone at the Senate hearing agreed on the role climate change will play in insurance markets.
“The insurance industry is not in the midst of a climate crisis and is not about to collapse,” Robert Hartwig, an economist and associate professor at the University of South Carolina, told lawmakers. “Climate risk is an important determinant of insurance costs, but there is a tendency to over-consider the effects of climate change when explaining insurance market conditions.”
What is clear is that costly natural disasters are occurring more frequently, with the average time between disasters reaching billions of dollars. From 4 months in 1980 to about 3 weeks today. As these risks increase, some insurance companies are leaving the state altogether. For example, state farms and allstate Dozens of small businesses have filed for bankruptcy or exited California. florida and louisiana.
As a last resort, homeowners are then forced to rely on government-backed insurance companies, which are available in only 26 states and are generally more expensive than private insurance. Enrollment in these state-run plans has skyrocketed and now covers more than $1 trillion in assets, according to the JEC report.
Rob Moore, director of the Natural Resources Defense Council’s water and climate team, said of the current regulatory regime, “It’s all up to the states.” “The federal government has very little role to play in the insurance market.”
The JEC report outlines several steps Congress can take to play a greater role in addressing this issue. For example, we highlight the need for further data collection through initiatives such as: Wildfire insurance application investigation method to better understand the problem. It also refers to the proposed shelter lawThis provides homeowners with a tax credit that covers 25 percent of hazard mitigation improvements that strengthen property resiliency, reduce the risk of catastrophic loss, and result in lower insurance premiums.
Mr Moore agreed that adapting older homes and future-proofing new homes was key to fixing the insurance market. “The real long-term problem is that we are securing structures that were never built with the risks and vulnerabilities that we currently face,” he said. “If we want a building that will be insured in 30 years, we have to build it now.”
Another change the report mentions is the possibility of the federal government becoming a reinsurer to backstop insurance markets stressed by climate change. insurance law I’m looking for. France, Japan, and New Zealand have such programs, and the report argues that such a move in the United States “could simplify a complex insurance sector and shift risks associated with catastrophes to the federal government.” There is.
But so far, none of these efforts have advanced in Congress, and all are sponsored by Democrats. With Republicans in control of the House, Senate and the presidency, it remains unclear whether the bill has much of a future.
“It’s an issue on everyone’s mind,” the commission’s analysts said, noting that taking a dollars-and-cents approach could cause the issue to resonate across the political spectrum. . “Wildfires are raging, flooding is increasing. This problem is not going away.”
