Nov 26, 2019

Climate change rains insurance misery on homeowners

Illustration: Aïda Amer/Axios

Climate change is making home insurance unavailable or unaffordable in the riskiest areas for hurricanes, wildfires and flooding.

Why it matters: As insurance companies pay record amounts to homeowners who have suffered partial or total losses, they retreat from or raise premiums in places where claims are owed.

What's going on: Company payouts for natural catastrophes in 2017 and 2018 stood at $219 billion, the highest ever for a consecutive two-year period, according to Swiss Re, a company — known as a reinsurer — that underwrites risks for home insurance and other policies.

  • Insurers continue to write policies in areas prone to disaster, but tend to hike monthly premiums to offset the cost.
  • Every state saw annual premiums rise between 2007 and 2016 (the latest year which data is available from the National Association of Insurance Commissioners).
  • States in tornado alley saw the biggest jump: Oklahoma saw a $654 increase over a decade, while Kansas saw premiums rise $501 on average.

Yes, but: The rise masks that insurers are limiting coverage in areas deemed too risky.

  • The 2018 Camp Fire in northern California was the most destructive in property damage the state's history.
  • Insured losses topped $13 billion last year, according to the California Department of Insurance.

Fearing bigger losses, insurers are pulling back from high-risk areas in California, leaving homeowners scrambling.

  • In the last three years, the counties at greatest risk for wildfires saw the number of new and renewed homeowners’ insurance policies fall by 8,700, according to the California Department of Insurance.

In Florida, homeowners have seen insurance costs rise as areas are considered more at-risk by insurers.

  • For residents by the beach or coast: Mortgage companies require flood insurance, a separate policy that's usually provided by the federal National Flood Insurance ~ typically $700.
  • Private companies, which once considered the risk too heavy, are dipping their toes back in —for a price.
  • The number of private companies offering flood insurance rose to 120 in 2018, (vs. 90 in 2017 and 50 in 2016, according to the Insurance Information Institute).
  • These players took in $541 million in premiums in 2018, an increase of 11.5% from the prior year.

Homeowners also need wind-related insurance, on top of regular homeowner's insurance, which are sometimes sold as a package.

  • "A huge portion of homeowner policy is wind- or hurricane-related in South Florida," Shahid Hamid, a professor at Florida International University, tells Axios.

The bottom line: Writing these policies could eventually put the insurers out of business.

  • Last year, California-based insurer Merced Property & Casualty filed for bankruptcy after it was unable to pay out millions of dollars in claims to policyholders after California's Camp Fire, per CNN.
  • "Regulators are becoming concerned about insurer solvency in the face of increasingly severe weather-related losses," according to a report by Deloitte.

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Coronavirus dashboard

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  1. Global: Total confirmed cases as of 10 p.m. ET: 5,690,951 — Total deaths: 355,575 — Total recoveries — 2,350,071Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 1,699,073 — Total deaths: 100,396 — Total recoveries: 391,508 — Total tested: 15,192,481Map.
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  4. States: California hospitals strained by patients in MexicoTexas Supreme Court blocks mail-in expansion to state voters.
  5. Business: MGM plans to reopen major Las Vegas resorts in June — African American business owners have seen less relief from PPP, Goldman Sachs says.
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Updated 13 mins ago - Politics & Policy

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

The European Union is considering an $826 billion coronavirus rescue package to fund recovery efforts for all member states, European Commission President Ursula von der Leyen said Wednesday.

By the numbers: More than 5.6 million people have tested positive for COVID-19 and over 2.3 million have recovered from the virus. Over 355,500 people have died globally. The U.S. has reported the most cases in the world (over 1.6 million from 15.1 million tests).

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

More than 100,000 Americans have died of the coronavirus, according to data from Johns Hopkins — a milestone that puts the death toll far beyond some of the most tragic events in U.S. history.

By the numbers: Over 1.6 million have tested positive in the U.S. Nearly 354,000 Americans have recovered and over 15.1 million tests have been conducted. California became the fourth state with at least 100,000 reported cases of the coronavirus on Wednesday, along with Illinois, New Jersey and New York.