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The rising frequency of billion dollar climate disasters is driving up insurance premiums and causing major carriers to retreat from high risk states like California and Florida. As insurers struggle to maintain profitability amidst intensifying wildfires and hurricanes, many homeowners are left with fewer, more expensive coverage options or must rely on state run “insurer of last resort” programs. This trend highlights a growing crisis where climate risks threaten the availability of affordable property protection.
The increasing frequency and severity of climate and weather disasters are making parts of the U.S. “uninsurable.” As catastrophic events like wildfires, hurricanes, and severe storms become more common and destructive, insurance companies are struggling to maintain profitability, leading to a ripple effect of higher premiums and reduced coverage options for consumers.
According to data from the National Oceanic and Atmospheric Administration (NOAA), 2023 was a historic year with 28 separate billion-dollar weather and climate disasters, surpassing the previous record of 22 in 2020. These events collectively caused over $92.9 billion in damages. The trend has continued in recent years, with the average number of billion-dollar disasters per year growing from around 3 in the 1980s to over 20 in the last five years (2020-2024).
This report, provided by Cheapinsurance.com, examines the rising cost of these disasters and the implications for the insurance marketplace.
Climate Disasters Drive Up Insurance Costs
The increasing frequency and intensity of climate disasters have directly impacted the insurance industry. To cover mounting losses, insurers have raised premiums significantly. A Bipartisan Policy Center report indicated that property insurance rates have increased every quarter since the end of 2017. Auto insurance premiums are also rising in disaster-prone areas, with some states seeing premiums increase by over 50% in a single decade due to events like blizzards, tornadoes, and hurricanes.
Insurers Retreat from High-Risk States
In the face of intensifying climate risks and financial losses, some major insurers are choosing to stop offering new policies or are pulling out of certain states altogether. For example, Allstate and State Farm have halted new property and casualty policy sales in California due to the high costs associated with wildfires. Similarly, many insurers have left Louisiana and Florida as the risk of hurricanes and tropical cyclones has intensified. This leaves residents in these high-risk areas with limited or no private insurance options, forcing them to rely on state-run programs that are often underfunded.
Severe Weather Causes the Most Damage
Nationally, severe storms, including thunderstorms, tornadoes, and hail, are the most frequent type of billion-dollar disaster. However, tropical cyclones (hurricanes and tropical storms) are the most costly, accounting for over 50% of all billion-dollar disaster costs since 1980.
In response to the limited insurance market, states have adopted various strategies. Florida has a state-subsidized program, while California regulates insurer rates, preventing them from raising prices based on current conditions. These solutions, however, are proving to be
Frequently Asked Questions About Climate Change and Insurance
How does climate change affect insurance costs?
Climate change increases the frequency and severity of natural disasters such as hurricanes, wildfires, and floods. As these events become more common, insurers face higher claim payouts, which can lead to higher premiums for homeowners, car, and other types of insurance.
Is the U.S. at risk of becoming uninsurable?
Some areas, particularly those prone to repeated natural disasters, may face challenges in obtaining affordable insurance. While the U.S. is not entirely uninsurable, coverage in high-risk regions may become limited or more expensive, prompting homeowners and drivers to consider additional risk mitigation strategies.
What can policyholders do to protect themselves?
Policyholders can reduce risk and potentially lower costs by taking preventive measures, such as reinforcing homes against natural disasters, maintaining proper safety equipment, purchasing flood or wildfire coverage where available, and shopping around for insurance carriers that offer risk-based pricing.
Data Work By Emma Rubin
Story editing by Nicole Caldwell and Alizah Salario. Additional editing by Kelly Glass and Elisa Huang. Copy editing by Tim Bruns and Kristen Wegrzyn.
