In the USA, the cost of home insurance is exploding with global warming

Since its installation, its risk premium has indeed tripled to reach 6,500 dollars, partly due to the increase in the costs of insurers linked to climate risks, under the effect of global warming.

“My children were born in Pensacola and we have many friends there, and even family,” he explained in an interview by telephone with AFP, but “I am in total telework, so I can live anywhere as long as I have a high-speed internet connection. If the situation becomes difficult, we can move. And we will”.

  • Premiums up –

Assets destroyed by natural phenomena exceeded $140 billion in value in the United States in 2022, of which $90 billion were insured, according to data from reinsurer Munich Re.
Debris left by Hurricane Ian in Fort Myers Beach, Florida (southeastern United States), November 2, 2022 (AFP/Archives – Eva Marie UZCATEGUI)
According to the company, which insures insurers, 70% of the total is linked to damage caused by Hurricane Ian, which crossed Florida last September.

The latest report from the Intergovernmental Panel on Climate Change (IPCC) recalled that global warming had “already had consequences on natural phenomena in all regions of the world”.

Faced with these phenomena, which have become extreme and more regular, the cost for policyholders is rising little by little.

In the United States, risk premiums for home insurance have increased by 9% over one year, sometimes more in certain States, according to the Insurance Information Institute (III), which represents professionals in the sector.

The main cause is the increase in reinsurance costs as well as reconstruction materials.

As for reinsurance, the increase is 30 to 40% over one year, according to III’s communications director, Mark Friedlander.

“We are seeing reinsurance costs increase year after year and clearly climate risk is the primary cause,” he told AFP.

Reconstruction costs, for their part, have increased by 30% over the past five years, mainly due to supply disruptions caused by the pandemic.

  • Regional differences –

At the state level, a series of local factors add to the challenges created by global warming.

In California, for example, hazard premiums are lower than the national average according to the III, mainly due to laws that allow the local government to have a say in increases.
Firefighters try to contain the Dixie fire in the hamlet of Indian Falls, California (western United States), July 24, 2021 (AFP/Archives – JOSH EDELSON)
While this may be good news for homeowners, it has also made life more difficult for insurers, who have found themselves unable to pass on the costs of forest fires, an increasingly common natural disaster.

This prompted State Farm, one of the main insurers, to announce that it would now refuse any new customers in California, “due to the rapid increase in exposure to natural disasters”.

On the Florida side, premiums have increased under the effect of several factors, according to the III, in particular the local law which is particularly protective for consumers which allows them to sue their insurer. Another reason is rising hurricane costs.

“We have human factors which are added to the climatic risks, it is the perfect combination for a strong increase in insurance premiums”.

If the owners saw their insurance increase, the number of people without insurance remained stable, around 7%, underlines the Institute, mainly because of the obligation of insurance within the framework of the mortgages.

But for Jack Hierholzer, his home insurance now costs him more, each month, than the repayment of his mortgage, which encourages him to think about what to do next.

“If the price of my insurance is like buying a new house every 12 years, it becomes smarter to go without insurance, pay off the loan and cross my fingers” that nothing happens.