A little over a year ago, Peter Gardner, a Louisiana developer, completed rehabbing an apartment building with 144 units and got a surprise so ugly it made him decide to move his business out of town.
When the project began, his broker estimated the annual cost of insuring it would be $75,000. But by the time Gardner finished it, the insurance cost had risen to $175,000. He paid it, but when he went to renew the policy this past July, he got another shock. The broker now said it was $275,000. An alternative broker could only find policies over $300,000 per year.
Gardner bought his first house for renovation in New Orleans in 1999 when he was still in college. Over the years, he’s tackled roughly 100 projects. He currently owns about 400 apartments that he rents. He survived the downturn after Hurricane Katrina in 2005, but now the market impacts of climate change have become so inexorable that he sees no choice but to start again in another city to the north.
“I’m a business climate refugee, because if I can’t make a profit here, I don’t feel comfortable buying new projects, investing here any further.”
Reeling from four hurricanes in 2020 and 2021 that caused $23 billion in damage, Louisiana is undergoing an insurance calamity that is harming the state’s economy and even reducing its population.
“There’s no question we’re experiencing a crisis in the insurance availability in our state,” said James Donelon, commissioner for the state’s Department of Insurance, who notes the crisis extends not only to property insurance for homeowners and businesses, but also to car and flood insurance, which are sold separately. “It’s certainly causing some people to turn in the keys and give up their homes and to shut the doors on their businesses.”
Not to mention that those of us in less damage prone areas are paying more too just so the insurance companies can recoup some of the losses.
The “less damage prone areas” are just a little behind the curve. Whether it’s the unprecedented Marshall Fire that scoured a suburb of Boulder in 2021, Hurricane Ida’s remnants dumping record rain in southern Pennsylvania, the 2022 Buffalo winter storm that killed people in an area experienced with blizzards, or the floods in “climate safe” Vermont this year, the extreme events are beyond any locals’ experience.
Home insurers don’t have to pay out for record-setting heat domes, so those premiums in Phoenix, El Paso, Austin, etc., should be stable for a while. We can save the money to pay for our air-conditioning bills.