USA - Worsening climate disasters could spark insurance rate surges for millions: report
A growing number of homeowners are finding it difficult to afford insurance on their homes, a problem expected to worsen with impacts of climate disasters, a new report said.
A report from First Street Foundation released Wednesday said insurance companies and lawmakers have underestimated the impact of climate change on insurance premiums.
States in the West have experienced increasing costs and damage from wildfires. Areas along the Gulf Coast have seen the effects of stronger tropical cyclones. Inland states have experienced an increase in the intensity, duration and frequency of flooding.
“For homeowners and businesses, the best way to protect themselves, their families, and their property is through insurance as a risk transfer mechanism,” the report said. “However, insurance companies that are seeing increased levels of exposure, inflation, and regulation are very quickly changing the ways in which they operate across much of the country.”
The report noted that groups like Allstate, American International Group, Farmers, Nationwide, AAA Insurance and State Farm have pulled coverage in areas that are at high risk of wildfires.
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Sometimes the companies pull coverage from the area completely or become more selective, avoiding at-risk properties. Both drive up premiums of the remaining companies in the area, now called “insurers of last resort,” the report said.
According to a wildfire model built by First Street Foundation, a leading researcher on the financial implications of climate change, more than 17,000 structures are expected to be destroyed annually, growing to more than 33,000 in 30 years, costing $14 billion this year and $24 billion in yearly damages by 2053.
To provide context, the report said that means that by 2053, wildfires are expected to burn down a city the size of Asheville, N.C., which has about 34,000 buildings, every year on average.
States like Florida and Louisiana are seeing similar effects. Increasingly, damaging effects of tropical cyclones have left few insurance companies providing coverage for the state, driving up premiums.
