Inflation is abating and many economists think prices for most things will settle back into normal ranges within a year or so. But America’s 86 million homeowners face a new form of sticker shock likely to get worse, not better: rising insurance costs largely caused by climate change.
Data from AM Best shows that during the last five years, insurers have lost money on homeowners insurance, on average, in 17 states. For the five years from 2014 through 2019, insurers lost money in just seven states. When insurers can’t make a profit in a given area, that’s a sure sign they will raise premiums, reduce coverage, or bail out of the market completely.
The same collision of forces is upending the insurance market in places where people used to take affordable coverage for granted. Like disaster-prone Florida and California, Iowa now has aWalter Rivas, 42, stands behind his modular home in West Hills that was damaged due to a landslide from all the recent rain. Insurers adjust slowly to losses and cost overruns for a couple of reasons.
Sela passes some of the higher insurance costs on to tenants through modest rent increases. But he also expects property values in Myrtle Beach to decline, leaving higher ownership costs atop lower property values. “It is not sustainable,” he said. “People cannot afford high rent on top of high cost for everything else.”
Localities will adapt and innovate. “If I were a developer in central Florida, I’d be mapping out the highest land not developed more than 10 miles from the coastline,” said Bunting of the Climate Adaptation Center. “Those will become the new oases.”