“Insurers are the Canary in the coal mine” becoming a catch phrase as experts grope for explanations of what is happening.
This is the kind of thing that crushes economies and creates chaos. Given current political realities in the United States, this is a dynamic that could tip a great Democracy into Authoritarianism.
Climate change and generations of U.S. housing and development policy are making homes, neighborhoods and entire municipalities riskier to insure, undermining the ability of Americans to live where they choose.
The current face of this crisis is a nationwide withdrawal by the insurance industry from regions threatened by wildfires and hurricanes, particularly along the Gulf Coast and California.
While there are other factors at play, this retreat is largely driven by the collision of climate change with long-term federal decisions to incentivize ever more expensive homes in riskier areas.
But insurance is just one manifestation of a larger problem, experts told The Hill, a canary in the coal mine offering a warning of more significant dangers rising out of sight.
And in a country whose economy is among the most unequal in the rich West, the cost of that danger falls increasingly on those least able to bear it.
A record number of billion-plus dollar weather disasters hit the U.S. in 2023, with 28 such incidents costing nearly $100 billion collectively, according to the National Oceanic and Atmospheric Administration. The previous record was set in 2020 at 22 disasters with 10-digit tabs.
The scale of these disasters, however, is only partly a result of climate change. In a world where America’s coastlines were dominated by wetlands and mangrove swamps, its conifer forests were burned regularly in low-intensity blazes and its housing stock was built with an eye toward resilience, these numbers would be far lower.
But state, federal and local governments have for decades incentivized both large-scale suppression of low-intensity fires and booming high-dollar coastal real estate, often on barrier islands. Those trends have left more people — and more insured home value — in the way of worsening fires, floods and storms.
The home insurance industry has lost money every year for the past five, according to a March report by the insurance rating site AM Best, part of a broader crisis in the industry.
In the broader category of personal insurance, the industry suffered three consecutive years of losses in excess of $20 billion.
“That’s why you see companies pulling back and retrenching — because they’re suffering enormous losses,” Robert Gordon, a senior vice president at the American Property and Casualty Insurance Association, told The Hill.
That Squawk Box interview between Becky Quick and that insurance trade association CEO David Sampson was pretty impressive in how in the entire 8 minute discussion of insurance rates they didn’t use the term climate change once.
Could someone here clarify for me how federal decisions “incentivized ever more expensive homes”? I get that NFIP didn’t keep up with flood risks and thus charged insufficient premiums, or that FEMA was a backstop for states’ emergency response planning, but how did the feds make people buy or build more expensive homes?