Homeowners in the United States are facing an enormous financial crunch due to the climate crisis, with many struggling to find insurance or even dropping premiums that are soaring due to a mounting toll of wildfires, hurricanes and other disasters, new federal government data shows.
The figures, the most comprehensive numbers ever released by the US treasury department on the issue, show insurance premiums are increasing quickly across the country, with people living amid the greatest climate-driven risks experiencing the steepest rises of all. In the four years to 2022, people living in the top 20% riskiest places for such perils paid, on average, 82% more than those in the 20% lowest climate risk zip codes.
The climate crisis is making it harder for insurance companies to operate, with many pausing or completely withdrawing from disaster-prone states such as Florida and California, which is currently being roiled by wildfires in the Los Angeles region.
More homeowners are now failing to pay their ballooning premiums, risking ruin if disaster hits, with insurers canceling at least 10% of policies in more than 150 risky zip codes in 2022, the report found.
The analysis bolsters previous findings that Americans are now facing starkly tangible climate costs, despite Donald Trump’s contention that the climate crisis is a “hoax” and of little importance.
“We are marching towards an uninsurable future,” said David Jones, the former insurance commissioner of California. “The climate crisis is driving an insurance crisis.
“This is the first such comprehensive report by government and it shows that wherever climate change is landing as more severe weather events it is causing greater insurance unavailability, higher insurance pricing and greater insurance losses.”
Jones said that while the “future doesn’t look very bright” on acting upon the climate crisis following Trump’s election, the report makes a clear case to cut planet-heating emissions.
“We’ve been saying this for some time now – the insurance crisis is the result of our failure to transition quickly from fossil fuels,” he said. “Insurance is the canary in the coal mine in regard to the climate crisis and the canary is now just about dead.”
The US treasury report, released last week in the final days of Joe Biden’s administration, is drawn from 330 insurers and the coverage offered to more than 246m homeowners. Seven states – Florida, Louisiana, Alabama, Georgia, Indiana, Montana and North Dakota – declined to take part in the study, while Texas didn’t provide some data.
“This report identifies alarming trends of rising costs of insurance, to consumers and insurers themselves, as well as lack of availability of insurance, all of which threaten the long-term prosperity of American families,” said Janet Yellen, treasury secretary under Biden.
States are increasingly having to set up backstop insurance options to cover residents as insurers decide to stop writing new policies or withdraw entirely from states. The Los Angeles fires, which may be the costliest fire event in California history, could push up premiums further or cause some insurers to leave the state.
In Florida, even deregulation called for by the insurance industry, leading to sky-high rates for residents, has failed to tempt back insurers that have exited that state. The climate costs to insurance are felt elsewhere, too, mostly around the hurricane-prone Gulf of Mexico coast but also in places unused to such ructions such as the midwest, which has seen an increase in damaging storms.
This all means that many Americans will increasingly face problems when buying new houses, Jones said, as insurance is required to obtain mortgages. Others will struggle to pay rising premiums or fall back on strained state-based systems that will have to be supported by taxpayers.
“Climate change is posing a systemic risk to the financial system, through insurance and housing, and it means it will get harder to get a mortgage and more people will be driven to state plans,” Jones said. “We will have to shore up these plans because they are going to face problems when there’s a catastrophic event.
“None of this is not going to get any better unless we address the climate crisis. We aren’t going to be able to de-regulate our way out of this, as Florida has shown. We have to address the underlying cause, which is climate change.”
