You're not in good hands: Battered insurers bail on climate-hit areas
How high costs and unavailability of coverage will hit locales with warming woes.
A native of England, veteran journalist Matthew Diebel has worked at NBC News, Time, USA Today and News Corp., among other organizations. Having spent much of his childhood next to one of the world's fastest bodies of water, he is particularly interested in tidal energy.
The numbers are eye-popping. For the average homeowner looking to buy $300,000 in replacement-cost insurance in Miami-Dade County, Fla., during 2019, the premium was $7,700. For the same owner nationwide, the price was $1,300. And in New Orleans and neighboring Metairie, La., the costs were $4,000 and $3,900, respectively.
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And things have gotten worse — Robert Stone, a New Orleans-based insurance agent, told Bloomberg that “premiums are double, if not triple” in the wake of 2021’s Hurricane Ida.
In short, climate change has spurred an escalating crisis for insurance companies and their customers. Or ex-customers. Not only are insurance firms upping their premiums, but they are also leaving specific geographical areas en masse. For example, in Louisiana, reports New Orleans TV station WDSU, at least three companies — Lighthouse Excalibur, Maison and Southern Fidelity — decided to dump their customers, citing high payouts from Ida. Like in many other states, there is a state insurer of last resort, Louisiana Citizens, but its premiums are set higher than the highest private rates among major insurance carriers so as not to compete with the private market.
The crisis is not confined to the U.S. In Australia, home to soaring numbers of wildfires and flash floods, the non-profit Australian Climate Council has released a study estimating that 1 in 25 or all homes and commercial buildings in the country will become effectively uninsurable by 2030. The report, “Uninsurable Nation: Australia’s Most Climate-Vulnerable Places,” says 520,940 buildings will be deemed "high risk," having annual damage costs equivalent to 1% or more of the property replacement cost.
The American insurance crisis has caught the eye of the Treasury Department, which is now eyeing the first nationwide assessment of insurers’ financial exposure to climate risk, reports E&E News, with the Federal Insurance Office sending a preliminary email last week to insurance regulators in all 50 states asking what data they have that would show insurance coverage, liabilities and losses for each ZIP code in their state over the past five years.
Meanwhile, while the regulators get to work, the likelihood is that the crisis will dull development in vulnerable areas. For example, Australia’s Climate Council has recommended the prevention of “new buildings and infrastructure from being constructed in areas that are or will be highly exposed to climate change hazards.”
And, of course, builders and potential homeowners — not to mention lenders — are likely to balk at construction if insurance is unavailable.
As the Romans said, caveat emptor.
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