As the latest climate-related crisis unfolds in Los Angeles, The U.S. Department of the Treasury releases most comprehensive data on homeowners insurance in history, along with report detailing higher costs to homeowners and insurers of elevated climate perils.
A recent report from the U.S. Department of the Treasury’s Federal Insurance Office (FIO) reveals alarming trends in the homeowners insurance market, driven by the growing impact of climate-related events. Analyzing data from 2018 to 2022 covering over 246 million policies, the report highlights rising premiums, reduced policy availability, and escalating operational costs for insurers.
Key findings include:
- Premium Increases: Homeowners insurance premiums outpaced inflation, with the highest climate-risk ZIP Codes experiencing rates 82% higher than low-risk areas.
- Decreased Availability: Policy non-renewals were 80% more frequent in high-risk areas, further limiting coverage options for consumers.
- Rising Insurer Costs: High-risk areas recorded more frequent and severe claims, with losses averaging $24,000 compared to $19,000 in low-risk areas.
These trends pose significant financial challenges for homeowners, insurers, and local governments that rely on property tax revenues. As climate-related events like wildfires, hurricanes, and severe storms grow in frequency and severity, the long-term sustainability of the homeowners insurance market is at risk.
The report underscores the need for continued collaboration among regulators, insurers, and policymakers to address these challenges and mitigate the financial burden on Americans. It also highlights efforts by the Treasury and state regulators to enhance data collection and transparency, paving the way for informed decision-making in a rapidly evolving insurance landscape.
Click here to view the Treasury report: Analyses of U.S. Homeowners Insurance Markets, 2018-2022: Climate-Related Risks and Other Factors.