In the wake of escalating climate-related risks, major insurance companies are revising their policies, leaving homeowners in vulnerable regions facing coverage challenges. At least five prominent U.S. property insurers, including Allstate, American Family, Nationwide, Erie Insurance Group, and Berkshire Hathaway, have reported to regulators that the impacts of climate change are prompting them to make critical adjustments.
These changes include discontinuing coverage for damage caused by hurricanes, wind, and hail in coastal and wildfire-prone areas. Additionally, monthly premiums and deductibles are on the rise. The National Association of Insurance Commissioners conducted a voluntary survey revealing these trends among major insurers.
The evolving landscape of climate-related risks has also led insurers to reconsider existing policies in vulnerable regions, with most home insurance contracts having annual terms, allowing providers to adapt swiftly.
Also read: Jeff Bezos and Lauren Sanchez Pledge $100 Million for Maui’s Recovery
The consequences are significant; homeowners and families in areas previously considered safe may find themselves without crucial insurance protections just as their exposure to natural disasters intensifies amid rising global temperatures.
Insurers recognize the need for more targeted hurricane risk mitigation efforts and are actively working on these strategies.
Recent natural disasters have underscored the escalating costs facing insurers. Hurricane Idalia caused severe flooding in Georgia and the Carolinas, while Tropical Storm Hilary inflicted $600 million in damages on the West Coast. In Hawaii, fires on Maui resulted in $3.2 billion in property damage. These events reflect the rapid escalation of claims costs in the context of climate change.
Over the past three years, U.S. insurers have disbursed a record $295.8 billion in natural disaster claims, according to Aon, an international risk management firm. The first half of 2023 alone saw $40 billion in insured losses, marking the third costliest first half on record, as per Aon.
While these changes may not be favorable for some consumers, insurance experts assert their importance for the overall stability of the insurance market.
