Climate change and insurance in the United States

[1][2] From 1980 to 2005, private and federal government insurers in the United States paid $320 billion in constant 2005 dollars in claims due to weather-related losses while the total amount paid in claims annually generally increased, and 88% of all property insurance losses in the United States from 1980 to 2005 were weather-related.

[8] From 2013 to 2023, U.S. insurance companies paid $655.7 billion in natural disaster claims with the $295.8 billion paid from 2020 to 2022 setting a record for a three-year period,[9] and after only the Philippines, the United States lost the largest share of its gross domestic product in 2022 of any country due to natural disasters while having the greatest annual economic loss in absolute terms.

[26][27][28] In November 2023, the FIO submitted the data collection request to the Office of Management and Budget for review and clearance under the Paperwork Reduction Act.

Senators Elizabeth Warren, Jeff Merkley, Sheldon Whitehouse, and Chris Van Hollen sent joint letters to the American International Group (AIG), Berkshire Hathaway, Chubb Limited, Liberty Mutual, MetLife, Travelers Insurance, and other U.S. insurance companies requesting information about how each company's continued fossil fuel underwriting aligns with its stated sustainability commitments in light of the withdrawal of underwriting by more than 25 major international competitors, as well as any climate change scenarios the companies have performed on physical risks to annual premium revenue and claims expenditures and any stress tests for transition risks the companies have performed due to their fossil fuel underwriting exposure.

[43] In March 2023, Chubb Limited announced that its insurance policies for oil-and-gas companies would require greater reductions in methane emissions for coverage,[44] and in May 2024, Chubb Limited CEO Evan G. Greenberg criticized state governments for blocking insurers from pricing climate risk into policies, stating "Climate change is sending price signals.

[43] In March 2022, AIG announced a carbon neutrality pledge aligned with the Paris Agreement and that it would cease underwriting coverage of new coal power plants, oil sands mining, and Arctic exploration.

[47] Nonetheless, the June 2023 Senate Budget Committee letter to AIG noted that the company received $675 million in premium revenue from the fossil fuel industry in 2021, had not restricted underwriting to any new conventional oil or natural gas development, and continued to provide coverage for the Trans Mountain pipeline.

[43] In its letters to Berkshire Hathaway and State Farm, the Senate Budget Committee noted that State Farm held more investments in oil and natural gas projects than any U.S. insurance company with at least $30.9 billion in fossil fuel investments, while Berkshire Hathaway was the largest shareholder of Chevron Corporation, Berkshire Hathaway Energy owned or had stakes in 24 coal power plants, and CEO Warren Buffett has stated publicly that climate change should not factor into the company's investment decisions.

[49] While criticized by OPEC and Republican Party lawmakers,[50][51][52] the International Energy Agency (IEA) projected in October 2023 that global demand for oil, natural gas, and coal would peak before 2030.

[66] In March 2023, the Senate Budget Committee held a series of hearings on the economic impacts of climate change that included testimony from insurance company executives and actuaries.

[104] Despite an estimated $135.6 billion in insurance losses due to claims related to extreme weather events in 2017,[105][106] reinsurance premiums saw only a 6% increase due to substantial capital inflows into the catastrophe bond and insurance-linked securities markets that enabled insurance companies to access the financial capital to cover the losses and resist the reinsurance premium increases.

[113][114] Reinsurance premiums to property insurers covering wildfire risk in California were expected to rise by 30% to 70% for 2020 in comparison to a global price increase of 10%.

[125][126] During the first half of 2023, there were 12 potential billion-dollar weather disasters in the United States, which tied with 2017 for the record number during the first and second quarters after the country averaged 8 annually from 1980 to 2022.

[128] Widespread thunderstorms in the United States during the first half of 2023 accounted for 70% of global natural catastrophe insurance losses and topped more than $50 billion for the first time on record.

[131][132] From 2017 to 2020, the national average home insurance premium in the United States rose by 11.4% while inflation rose by only 7.9% after extreme weather events and secondary catastrophes (which include wildfires, thunderstorms, droughts, flash floods, and landslides) caused $370 billion in inflation-adjusted claims,[133] and the increasing frequency, destructiveness, and cost of secondary catastrophes are requiring insurance companies to incorporate models for them into their policy risk assessments.

[156] After Hurricane Katrina in 2005, home insurance policies in hurricane-prone areas typically began including "hurricane deductibles"—a special type of deductible that requires policyholders to pay a percentage of the property value rather than a flat amount that have been criticized by consumer advocates for shifting repair costs from insurers to policyholders.

[165][166] After 28 billion dollar weather disasters in the United States in total in 2023 caused $80 billion in insured natural catastrophe losses,[167] home insurance premiums had risen by 23% over the previous year in May 2024 while the CPI saw a 3.3% year-over-year increase,[168][169] National Association of Realtors preliminary home prices data for the month showed a 5.8% year-over-year increase,[170][171] and PPI final demand construction prices fell by 0.9%.

[172][173] In October 2024, Zillow announced that it would join Redfin and Realtor.com in including climate risk data computed by the First Street Foundation for all properties listed on the site.

[174][175] Real estate industry estimates released in June 2022 showed that 33 million homes with $10.5 trillion of reconstruction cost value along the Gulf and Atlantic Coasts were at risk of hurricane-force wind damage.

[185] In May 2023, State Farm announced that it was halting all new-home insurance policy sales in California due to increased wildfire risk and rising inflation,[186] while Allstate announced that it would it also halt all new-home insurance policy sales in California due to increased wildfire risk the following month.

[188][189] In November 2023, the Senate Budget Committee opened an investigation into Citizens due to concerns about a potential federal bailout being required in the event of an extremely destructive hurricane after Florida Governor Ron DeSantis made comments suggesting that the company was insolvent,[190][191] and the Senate Budget Committee renewed its requests for documents and information from Citizens in March 2024.

[194][195][196] While research published by Land Economics in 2018 found that the 2002 Florida building code reduced windstorm insurances losses in the state by 72% between 2001 and 2010 with a 6-to-1 ratio in reduced insurance losses to increased construction costs,[197] construction industry estimates have found that compliance with the newer codes increased home prices by as much as 45% in certain parts of Florida by the time of Hurricane Irma.

[207][208] Coupled with migration out of the San Francisco Bay Area during the COVID-19 pandemic in the state,[209] the rising home insurance premiums from the increased wildfire risk is exacerbating pre-COVID housing affordability issues in California (especially in the Sierra Nevada region) that have seen thousands of California residents relocate to states such as Nevada, Idaho, Utah, and Arizona.

[193][211][212] From July 2021 to February 2023, 12 home insurance companies with policy coverage in Louisiana were declared insolvent, 50 other companies stopped writing policies in hurricane-prone parishes, the number of policyholders covered by the state insurer of last resort rose from 35,000 to 132,000, and 4 of the 10 counties in the United States with the largest population declines from 2021 to 2022 were in Louisiana (led by St. John the Baptist Parish).

[221] While real estate industry data showed the Tampa Bay area to be the fifth most popular relocation destination in 2023, the region saw a 58% increase in the housing supply of single-family home and condominiums and a 10% decrease in housing demand from August 2023 to August 2024 and about half of the homes in the region saw price reductions through September 2024–the third highest ratio for major metropolitan areas in the country.

[221] During the first three quarters of 2019, business insurance premiums in the United States rose by 6.7% due to losses from hurricanes, wildfires, and other catastrophes and was on pace for its highest annual increase since 2003.

[230][3] Despite the rising frequency and cost of flooding, the NFIP lost nearly 1 million policyholders from 2009 to 2023,[231] while the Federal Emergency Management Agency (FEMA) spent $4 billion from 1989 to 2024 financing 45,000 to 50,000 floodplain buyouts.

[253] As of September 2023[update], 10 states had filed lawsuits against FEMA (as the NFIP was scheduled to expire at the beginning of the following month) for the NFIP pricing system overhaul as it was estimated that two-thirds of the program's policyholders would see premium increases, that premiums would double in 12 coastal and landlocked states, and cause homeowners living in flood zones to lose their homes by losing insurance coverage required by the terms of their mortgages.

[269] From January 1996 to September 2000, vehicle insurance losses from natural disaster claims amounted to $3.4 billion on 1.7 million claims and averaged 10% of total annual disaster-related property insurance losses, while the National Highway Traffic Safety Administration estimated in 1999 that 16% of vehicle collisions were attributable to adverse weather conditions.

[293][294] Parametric insurance coverage has increasingly been offered to businesses and local governments in the United States to cover losses from property damage, lost productivity, and workplace injuries related to the rising frequency, intensity, and duration of heat waves.