s the June 1 start of hurricane season approached last week, Florida lawmakers raced to address a crucial gap in the state’s coastal defenses: property insurance. In the state, insurance market are in crisis. Premiums have risen and most homeowners cannot find companies that will insure them against property damage. Fraud and abuse are two major causes of this problem. They increase costs and force insurers to close. But climate change is also playing an important part in the state’s insurance disaster, even though it hasn’t gotten much airtime in local news coverage, or in pronouncements from the state’s Republican leadership.
Already, climate change has contributed to more severe and destructive hurricanes. This trend will continue as the world warms. For Florida homeowners, that means rising insurance costs (about 25% in the last year, according to the Insurance Information Institute, an industry association) as their risk of damage goes up and insurers pay out more and more to rebuild homes after each disaster—a mechanism that functions like a stealth tax on climate risk. “What you pay in insurance is sending you a message about your vulnerability,” says Lynne McChristian, director of the Office of Risk Management & Insurance Research at the University of Illinois Urbana-Champaign. “There is a price to be paid for living in what is arguably the most vulnerable natural disaster location in the U.S.”
Large national insurers were forced out of Florida’s property insurance market by hurricane-related catastrophes. In recent decades they were replaced with smaller, local players that are more susceptible to the market for reinsurance (essentially insurance for companies). They need to support them in the event of big storms and have to make payments. The smaller companies are also at greater risk of going under due to the tides of non-climate related litigation common to the industry, that firms with less of a war-chest can’t withstand—as well as the fact that storms create more opportunities for actors to take advantage of the system, like contractors that cruise neighborhoods looking to repair roofs that may or may not have been damaged, and charging insurance companies for the work. “Companies have a really difficult time when it’s just storms, and the companies have a really difficult time when it’s just fraud,” says Charles Nyce, associate director of the Center for Risk Management Education and Research at Florida State University. “But when it’s storms and fraud, which is what we’ve had over the last few years, they can’t survive.”
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At the moment, the sputtering markets for insurance are mainly a Florida issue. Climate change is accelerating, and those problems could spread to others states. It’s an unpleasant addition to increased disaster risk like wildfires and floods. Damage caused by extreme weather events is already jacking up insurance costs in other parts of the country, like the Gulf states and California, and big national insurers could even pull out of newly disaster-prone areas, leaving more states in Florida’s same tenuous insurance situation.
While the insurance industry plays against its own climate interests, it is also undermining policies to combat global warming, and underwriting fossil-fuel projects that may increase the risk to the homes they insure. Influence Map, an influential climate group published last month a report claiming that the U.S. insurance sector was working to weaken and delay new federal and state climate regulations. One reason for this policy resistance has been the inability of insurance companies to disclose to regulators how their businesses plan to deal with climate risks. Meanwhile, the industry has been actively working to avoid disclosing how much it has been investing in and underwriting fossil fuel projects—for example, the American Property Casualty Insurance Association, a trade group, helped tank a California bill earlier this year requiring companies make those types of disclosures. “The fact that [the regulations are] so new, and industry associations are jumping on it already and trying to slow it down: that’s important,” says Cleo Rank, a policy analyst at Influence Map. “That will determine if we see more regulation like this.”
Florida just approved $2 billion in state-backed insurance funds and legislation that restricts the fees attorneys may collect when they sue insurers. That may help bring down costs in the near term, but they won’t do much to change the longer term pattern of more frequent and intense hurricanes battering an increasingly populated Florida coast, and the growing cost of rebuilding after those disasters.
Experts warn that it is important to prepare for whatever a warming planet might throw at you. One longer term answer would be to relocate from climate-vulnerable areas, but so far there hasn’t been much appetite for that. You could also upgrade buildings and homes in advance to limit hurricane damage in the future and reduce your insurance premiums. Florida seems to be heading in this direction. One line item of one the new bills gives homeowners $10,000 for home improvement projects like roof and door replacements. “We haven’t figured out a way to stop a hurricane yet,” says Nyce. “That means, when it hits, you have to be resilient. That means hardening homes.”
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