The Midwest is once again being highlighted as a potential refuge from the threats of climate change, which continues to fuel increasingly destructive natural disasters around the world.
In the United States, devastating wildfires and hurricanes have sent insurance premiums skyrocketing in states like California and Florida, with some residents recently reporting paying as much as $3,000 per month for home insurance. Increasing costs and the threat of extreme weather have prompted people to uproot their lives and move elsewhere—often to the Midwest.
Now a new survey out of Michigan suggests that businesses, too, may be eyeing America’s heartland as a place to set up shop in order to reduce the mounting costs associated with global warming.
“The evidence of climate change is growing like a crescendo,” said Scott Thomsen, CEO of LuxWall, a Michigan-based window manufacturer. “We’re certainly seeing it in our industry.”
Thomsen was one of 300 senior-level executives interviewed in a survey released Sept. 30 by MIT Technology Review Insights and the Michigan Economic Development Corp., or MEDC. The executives, who work across 14 industries, including retail, financial services and manufacturing, all reported that their companies have been harmed to some degree by climate change. Those harms include physical damage to property, increased operational costs, rising insurance premiums and disruptions to their supply chains.
Three-quarters of the survey respondents said their companies have considered relocating due to climate risks, with nearly a quarter saying they’ve already relocated in part because of climate change. About 6 percent said they plan to move their businesses within the next five years.
Nearly half of the survey participants also believe the Midwest is the nation’s least vulnerable region when it comes to climate risks.
Avoiding exposure to these risks was one reason LuxWall chose to call Michigan home, Thomsen said. Founded in 2016, the company considered six Midwestern states for its headquarters before deciding on the city of Ypsilanti. In August, the company opened its second factory in the Michigan town of Litchfield, with another facility planned for Detroit.
“We’re really lucky in most ways,” said Hilary Doe, Michigan’s chief growth officer and head of marketing for MEDC. “Michigan has been ranked the best state for climate change when considering drought or extreme heat, wildfires, flooding—that kind of thing.”
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But actually, midwestern states are not without risk. Exposure to extreme storms is happening everywhere, as insurance companies are finding out.
The data show that homeowners insurance was unprofitable in 18 states last year, up from eight in 2013. Most of those states are in the interior of the country, hit by severe storms and hail in the Midwest and Southeast, and wildfires in much of the West. In response to those losses, insurers have raised premiums, narrowed coverage and dropped customers, and even entirely withdrawn from some states.
A shaky insurance market threatens the entire economy. Without insurance, banks won’t issue a mortgage; without a mortgage, most people can’t buy a home. With fewer buyers, real estate values are likely to decline, along with property tax revenues, leaving communities with less money for schools, police and other basic services.
Insurers are regulated by states, which are trying different strategies to shore up the industry: Making it easier for companies to raise premiums or encouraging homeowners to make their homes more resilient to damage. It’s not yet clear if any of those strategies are working, especially as Americans keep moving to high-risk areas and as climate change gets worse.
“Insurance is where many people are feeling the economic impacts of climate change first,” said Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund. “That is going to spill over into housing markets, mortgage markets, and local economies.”
If you can afford the up-front expense of building new, more resilient and efficient houses or business structures, you can be much less vulnerable to derechos, hailstones and extreme temperatures. Designing your ground floor so that it can be sacrificed to any extreme flood event (tile floor, finished cinderblock, overhead wiring, etc.) means that recovery will be quicker.
Po’ folk will still only be able to afford houses in riskier neighborhoods. That will never change.