Global Warming Comes Knocking: "The Insurance Crisis In The US Is The Canary In The Coal Mine, And The Canary Is Dead"

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For insurers, the three hurricanes were a rude awakening. After years of underestimating risks posed by climate-fueled storms, wildfires, and other natural disasters, the industry now faces a perilous future. Old models based on stable climates are being challenged by more frequent, extreme, and damaging events — from searing wildfires in the coastal canyons of California, to hail and torrential rain in the Midwest, to explosive hurricanes such as Ian in Florida, Louisiana, and Texas. Now, as sea levels rise, drenching rain storms swell rivers, and hail the size of baseballs pound roofs and cars, the increased costs are pushing insurers to the limit, upending housing markets, and even reshaping the makeup of some communities.

“The insurance crisis in the U.S. is the canary in the coal mine, and the canary is dead,” said Dave Jones, the insurance commissioner of California from 2011-2018 and now director of the Climate Risk Initiative at the Center for Law, Energy and Environment at the University of California, Berkeley. During his time as commissioner, wildfires exploded in Paradise and Malibu, resulting in billions in damages. Coupled with the Trump administration’s aggressive moves to roll back climate initiatives, Jones fears: “We are marching toward an uninsurable future in this country and across the globe; marching into the abyss.” Jones isn’t alone in such dire warnings. Testifying this February before the Senate Banking Committee, Federal Reserve Chairman Jerome Powell predicted that “in 10 or 15 years there are going to be regions of the country where you cannot get a mortgage [because insurance isn’t available].”

Even more recently, the economists and climate analysts Carolyn Kousky, Spencer Glendon, and Barney Schauble raised the idea that the future may be uninsurable. “As natural disasters grow more frequent, extreme, and damaging, more people and businesses are struggling to afford — and even get — insurance,” they wrote in a recent article. “In places of increased climate risk from disasters such as fires and storms, insurance has gone from an afterthought to a source of concern, dismay, and anger.”

The markets for property and flood insurance are already in crisis, and in some high-risk areas, are broken, analysts say. Dozens of insurers in Florida, Louisiana, Texas, and California have collapsed or been declared insolvent following searing wildfires and catastrophic hurricanes. Meanwhile, prominent national insurers, including Progressive, Allstate, and State Farm, have fled high-risk states or scaled back on writing new policies. In one five-year period, 2018-2023, insurers canceled nearly 2 million homeowner’s policies in the face of rising climate risks — over four times the number that would normally be expected in a year. Many of the notices came with little warning or explanation, leaving homeowners scrambling to find new coverage, no longer a given, and likely at a sharply higher price.

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https://e360.yale.edu/features/climate-change-home-insurance