Think Climate is Not Affecting You? Check Your Insurance Bill

May 8, 2023

I posted recently on the emerging insurance crisis in Texas and Louisiana, related to Climate risks.
It’s not getting any better.

New York Times:

If you don’t think you’ve been affected by global warming, take a closer look at your last homeowners’ insurance bill: The average cost of coverage has reached $1,900 a year nationwide, but it’s $4,000 a year in New Orleans and about $5,000 a year in Miami, according to Policygenius, an online insurance marketplace. And that is pocket change compared with the impact climate change may ultimately have on the value of your home.

We have reached a turning point: Climate risk is driving insurer decisions like never before.

After recent years of paying out claims for about 20 disasters a year with damages of over $1 billion, a sixfold increase from the 1980s, insurers are getting serious about new pricing models that incorporate the costs of a warming climate. Across the United States, premiums jumped 12 percent from 2021 to 2022, according to Policygenius estimates, and they are expected to continue to rise.

Even with higher premiums, unpredictable losses are wreaking havoc on insurers’ bottom lines. Ten insurers have gone belly up in Florida in just the last two years. And in many cases, insurers are pulling back in risky areas, leaving state-backed insurance plans holding the bag. Both private and government-backed insurers are undercapitalized for dealing with the potentially massive disasters we could be facing in coming years. This shortfall foreshadows more premium increases, which will drag down house prices. And losses will not be borne by those residing in higher-risk areas only; they will be borne by policyholders everywhere.

Thus far, housing markets have largely managed to ignore these potential exposures. Over the last three years, home prices are up around 37 percent nationwide. They are up even more in parts of Florida and the Southwest that are predicted to suffer significant impacts from a warming climate. Take Phoenix, which, by 2060, is forecast to endure 132 days each year with temperatures of over 100 degrees. Last summer, the water level in Lake Mead, a critical source of water for 25 million people in the Southwest, reached its lowest level since the reservoir was filled in 1937. And living in Phoenix requires energy-intensive amenities like air conditioning, which worsen these consequences. Yet Phoenix home prices are up 53 percent since January 2020.


Texas – Its sheer size and geography means Texas has a lot of risk. First Street’s data shows some of its counties are at great risk of wildfire, some face higher potential losses from tropical cyclone winds and some have greater flood risks. The Lone Star State leads the nation in billion-dollar disasters, according to information from the National Oceanic and Atmospheric Administration. It averages 5.3 such events a year, double the number it experienced in the previous 20, even adjusted for inflation.

Florida – 8,346 miles of shoreline, surrounded on three sides by water. Need we say more? Rising sea levels and extreme rainfall fueled by warming oceans, with the potential for more intense hurricanes while more people crowd into densely populated areas, increase the risks. Florida has the most top spots on First Street’s list of counties that could see the biggest increases in the number of days with the very warmest temperatures they experience today. 

New Jersey – The Garden State has counties among the top of First Street’s lists for potential increases in average annual wind losses, extreme fire risk and properties at risk of flooding. New Jersey suffered three hurricanes or their remnants in 2021-22, including Hurricane Ida, Hurricane Henri and the final vestiges of Hurricane Ian. Forecasts for higher winds from more tropical cyclones and hurricanes aren’t good news. 

California – Over the past three years, the state has seen its largest wildfire season in history, its worst drought in 1,200 years and a string of record-setting atmospheric rivers. Golden State residents need no reminder of the risks they face, but First Street’s data shows some California counties high on its lists for most extreme fire risk and some cities with the greatest percentage of residential properties at risk of flooding.

Which states did Moody’s Analytics find face the greatest physical risks?

When it comes to weather-related events, hurricanes are literally the heavy hitters when accounting for acute physical risk. Climate change already is cranking up the rain in some tropical storms and hurricanes and could be slowing them down over land but that research is still underway, scientists say. Floods and wildfires also figured into Kamins’ assessment of physical risks. Here’s his list:

  • Florida
  • Louisiana
  • South Carolina
  • North Carolina
  • Delaware
  • Rhode Island
  • New Jersey
  • Virginia
  • Massachusetts
  • Connecticut

Other locations suffer from change happening over time rather than in single headline-grabbing events. Think the creep of rising sea levels or warmer nights and higher average temperatures.  

San Francisco faces above average risk across these categories and more, and is the nation’s most exposed large city, Kamins said.

It’s one of those urban areas where residents aren’t used to temperature extremes and many homes don’t have air conditioning, he said. In a world where temperatures rise 5-10 degrees, unlike Floridians, San Francisco residents are ill-equipped for dealing with heat and it could be economically damaging.

Other cities with more gradually increasing risk on the Moody’s Analytics list are: 

Southeastern metropolitan areas are particularly risky because they’re experiencing rising sea levels and higher temperatures, in addition to a parade of cyclones that could be growing more intense, according to Kamins’ study. The top 10:

  • Jacksonville, NC
  • New Bern, NC
  • Myrtle Beach, SC
  • Wilmington, NC
  • Greenville, NC
  • Charleston, SC
  • Punta Gorda, FL
  • Deltona, FL
  • San Juan, PR
  • Palm Bay, FL
  • Goldsboro, NC

One Response to “Think Climate is Not Affecting You? Check Your Insurance Bill”

  1. One way or the other we have to pay the price for climate change. We might as well invest wisely in energy transition. This wont come at a show string. There is no such thing as a free lunch. Every economist can tell you this. So why not listen for once. And do the proper thing.

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