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Climate change and insurance | The Week

by Cedric Guzman

Title: The Impact of Climate Change on Insurance Coverage


As climate change continues to manifest in various forms, it is increasingly affecting the insurance industry. The rise in extreme weather events has made it difficult for insurance companies to provide coverage in areas of growing risk. Consequently, certain regions may become highly unaffordable or even uninhabitable in the future. This article explores the shifting landscape of insurance coverage due to climate change and its implications on homeowners and the housing market.

The Shifting Insurance Coverage

According to a report by the First Street Foundation, nearly 40 million properties across the United States are at risk of rising insurance rates and non-renewals. This alarming statistic accounts for approximately one-quarter of all homes in the country. The increased risk of natural disasters, exacerbated by climate change, has created challenges for insurance companies. Homeowners are now facing higher insurance prices and reduced coverage due to these heightened climate risks.

Regions prone to wildfires, flooding, and strong storms, such as California, Florida, and Louisiana, are among the most affected areas. However, the impact of climate change is beginning to emerge even in inland states like West Virginia. Jeremy Porter, co-author of the First Street Foundation report, warns that while some areas may face minimal impact, others could experience massive increases in insurance premiums in the coming years.

Unaffordable and Uninsurable Regions

In some cases, homeowners are choosing to forgo insurance altogether, as certain regions have become essentially “uninsurable.” Without the availability of relatively affordable policies, homeowners cannot afford the ownership costs associated with homes in high-risk areas. Moreover, property values in these regions are likely to deflate. Conversely, other regions may face an “insurance bubble,” where homes are overvalued due to underpricing of climate change-related risks by insurance companies.

The Implications and Challenges

The increasing difficulty in predicting climate risks is a key factor in this insurance coverage dilemma. Insurers can no longer rely solely on historical data to assess risks when unprecedented events become more frequent. As a result, insurance companies have been forced to raise rates to reflect the escalating risk. However, even high premiums may not adequately cover potential losses, leading major insurers to conclude that some locations are simply uninsurable.

The lack of affordable insurance due to climate change impacts has a profound effect on the housing market. Previously, regions with higher climate risks tended to have lower living costs. However, with the inclusion of insurance costs, the affordability of these areas has decreased significantly. Local and state governments need to prioritize the construction of resilient housing in low-risk areas with manageable insurance costs to address the issue of housing affordability.


Climate change poses significant challenges to the insurance industry and homeowners alike. The increasing frequency and intensity of extreme weather events make it difficult for insurance companies to provide coverage in high-risk areas. As insurance prices rise and coverage diminishes, homeowners face the dilemma of unaffordability and reduced protection. Addressing this issue requires a multifaceted approach, including accurate risk assessment, resilient housing construction, and policy interventions. Only by adapting to the changing climate risks can we ensure the sustainability and affordability of housing for future generations.

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