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 happening: 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 that underwrites risks for insurers, known as a reinsurer.
- 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 available data 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 terms of property damage in the state's history.
- Insured losses topped $13 billion last year, according to the California Department of Insurance (CDOI).
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, per CDOI.
In Florida, homeowners have seen insurance costs rise in areas 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 Program for typically around $700.
- 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 as weather events become more unpredictable.
- 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," Deloitte writes in a report.