Not Just in Florida: Insurers Under Increased Climate Pressure

Local news report above from KSN TV, Wichita, Kansas.

Below, rain patterns from today’s “100 year storm” in New York City area.
This summer’s epic rains in the US Northeast have me asking, how long can insurers continue to operate in some of these vulnerable areas?

Flatwater Free Press (Nebraska):

When Jenn Burruss got home from work last Wednesday, she started cooking dinner and opening mail. She saw her annual homeowners insurance renewal notice and shuffled it to the bottom of the pile.

When she finally opened the notice, it laid bare a painful question: Could she, a single woman raising three kids, afford to keep her house?

Last year, the premium to insure her home in Hickman, a city of 2,600 people south of Lincoln, was just over $1,400. Now, it would be almost $2,900. 

“I am terrified,” she told the Flatwater Free Press, noting her property taxes also are increasing. “I don’t know how long I will be able to stay there.”

Steep increases in homeowners insurance premiums have become common in Nebraska. 

On average, Nebraska homeowners paid nearly twice as much to insure their homes in 2020 as they did in 2007, a sharper increase than most other states, according to data provided by the Insurance Information Institute. 

A recent analysis from PolicyGenius found the average premium in Nebraska this year for $300,000 in dwelling coverage is about $3,500, double the national average and the second-most expensive in the country.

“Much of the increase (since the pandemic) can be attributed to supply-chain issues and labor shortages, which are driving up the cost of home repairs and replacement,” said Scott Holeman of the Institute. “But longer-term trends also affect rates.”

The key long-term culprit in Nebraska, according to industry experts and local agents, has been more severe weather events – a byproduct of climate change. 

“Instead of just replacing a roof or some broken windows, they are now having to rebuild entire communities from the ground up,” said Jane Egan, who has sold insurance primarily in Lancaster County for four decades. Those events have left companies with no choice but to raise rates, she added.

Nebraska’s temperatures have risen more than 1.6 degrees Fahrenheit since the start of the 20th Century, according to the National Oceanic and Atmospheric Administration. 

Former Nebraska State Climatologist Martha Durr said that the state also is seeing more precipitation on an annual basis, while swings from wet to dry are getting stronger: Wet times are wetter, dry times are drier. 

Data for hail and wind is more complicated, Durr said, because it relies on people submitting reports. But, a warmer atmosphere holds more moisture, which amplifies the “ingredients” for severe storms and can result in more extreme weather, Durr said.

“In what we can tease out from the information that we have, it looks like the events are getting stronger and there’s more damages associated with these events,” she said.

The number of weather and climate disasters that have caused at least $1 billion in losses and affected Nebraska has been rising for decades, according to data from NOAA. In the 1990s, Nebraska was affected by four of those events, total. In the last five years alone, it has seen 17.

More intense storms can cause more damage and increase the number of claims, according to Jamie Chung, professor of finance, banking and real estate at the University of Nebraska at Omaha.

Insurers look at how often these storms happen when they do their modeling, said Scot Kibbe, vice president of state government relations for the American Property Casualty Insurance Association.

“Those models are just being thrown out the window the last few years, because it’s changed so much because there’s so many more of these events – throughout the country, and obviously in Nebraska, too,” he said. 

Egan said she started noticing an uptick in premiums in coastal states after Hurricane Katrina devastated New Orleans in 2005. Agents knew the increases would eventually spread, she said.

“And then, as climate change has intensified the frequency and strength of these storms … we were getting messages directly from our insurance carriers that premiums were going to have to be adjusted pretty dramatically.”

Chip Bullock, an agent in central Nebraska for two decades, said he’s seen premiums increase rapidly in the last few years, by between 10% and 40%. 

Previously, he saw typical increases tied to inflation and property values. But Bullock said the last two years in particular brought “unbelievable” increases, mostly due to hail and wind.

Below, from my interview with Martha Shulski PhD, who recently retired as Nebraska State Climatologist.