States Get Desperate As Climate Drives Away Insurers

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Stateline ran an excellent analysis titled “States beg insurers not to drop climate-threatened homes.” The begging itself won’t help. Insurers, who used to think of states like Florida and Louisiana as posing a high financial risk due to hurricanes, have now turned their anxiety from the coasts to places plagued by wildfires, hail storms, and tornados.

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Several byproducts of insurers’ decision to leave some parts of the nation where they lose money on property coverage are no longer viable places to do business. Some have stayed in risky states but raised premiums by high double digits. Many homeowners have to move because they cannot cover the higher price. Banks may require insurance as part of mortgage covenants in areas with no insurance. This pushes people out of their homes as well. Over time, this undermines housing prices. 

Role Of Natural Disasters

Stateline states, “Natural disasters are increasing at the same time risk-prone areas are becoming ever more populated, and as property values are climbing.” The best example of this by far is Florida. As an example, Miami’s population in 2000 was 362,470. Today, it is over 450,000. Scientists believe that two-thirds of the city could be underwater by 2060. CNBC states, “Rising seas threaten to swallow much of the Miami metro area in the coming decades as the world continues to warm and faraway ice sheets melt. By 2060, about 60% of Miami-Dade County will be submerged, estimates Harold Wanless, a professor of geography and sustainable development at the University of Miami.”

The Last Resort

Several states have themselves become insurers of last resort. Still, it is unclear how long regulators and politicians who do not see home insurance as part of a state’s business will tolerate this.

States are desperate, and that won’t change. It is only going to get worse.

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