RUN FOR COVERAGE

Climate change poses unique problems and potential solutions for insurers

- Damien Martin

Fires, floods, droughts; climate change is taking its toll. As more areas become more prone to extreme weather events, insuring homes becomes an expensive proposition. Home insurance premiums have gone up 31% in the U.S. since 2019, and in high-risk areas those figures will keep going up. Climate risk analysis nonprofit First Street forecasts huge increases in coastal cities such as Miami (322%), Jacksonville (226%), Tampa (213%), New Orleans (196%), and Sacramento (137%). At the same time, home values in those areas will go down as buyers shy away from the risk. It leaves insurers, which paid out 10% more in claims than they took in in premiums in 2023, with a dilemma. How they respond will define the industry’s future.

Left Behind

First Street identified more than 21,000 “climate abandonment neighborhoods,” about a quarter of census tracts, where populations are likely to decline because of climate risk and high premiums.

“What we’re seeing is that in some places where the economic structure is a little bit weaker, the impact of climate is stronger,” Jeremy Porter, head of climate implications research at First Street, told Fast Company. “It’s something that’s just an additional factor that people decide, ‘OK, that’s enough. I can’t get a job here, and I also don’t want to put up with persistent extreme rainfall events’ or something like that.”

First Street’s analysis forecasts that more than 5 million Americans will migrate internally this year, seeking out more climate-friendly areas, which, in turn, will see home values go up. Over the next 30 years, First Street projects climate risks will have more than 50 million Americans moving in search of greener pastures.