Reinsurance

Millions of Americans have been watching with growing alarm as their homeowners insurance premiums rise and their coverage shrinks. Nationwide, premiums rose 34% between 2017 and 2023, and they continued to rise in 2024 across much of the country. To add insult to injury, those rates go even higher if you make a claim – as much as 25% if you claim a total loss of your home. Why is this happening? There are a few reasons, but a common thread: Climate change is fueling more severe weather, and insurers are responding to rising damage claims. The losses are exacerbated by more frequent extreme weather disasters striking densely populated areas, rising construction costs and homeowners experiencing damage that was once more rare. Hurricane Ian, supercharged by warm water in the Gulf of Mexico, hit Florida as a Category 4 hurricane in October 2022 and caused an estimated $112.9 billion in damage. Ricardo Arduengo/AFP via...

When the nation’s No. 1 and No. 4 property and casualty insurance companies – State Farm and Allstate – confirmed that they would stop issuing new home insurance policies in California, it may have been a shock but shouldn’t have been a surprise. It’s a trend Florida and other hurricane- and flood-prone states know well. Insurers have been retreating from high-risk, high-loss markets for years after catastrophic events. Hurricane Andrew’s unprecedented US$16 billion in insured losses across Florida in 1992 set off alarm bells. Multibillion-dollar disasters since then have left several insurers insolvent and pushed many others to reevaluate what they’re willing to insure. I co-direct the Center for Emergency Management and Homeland Security at Arizona State University, where I study disaster losses and manage the Spatial Hazard Events and Losses database (SHELDUS). As losses from natural hazards steadily increase, research shows it’...