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Home insurance rates are rising around the country in large part due to increasing impacts of climate amplified extreme weather events.
More and more states are creating taxpayer funded “Insurers of last resort” to serve homeowners who have lost their coverage, or can no longer afford private insurance. That’s an economic time bomb.
More than 1 million customers with Citizens Property Insurance, the state’s insurer of last resort, could see their rates go up by hundreds of dollars when they renew next year.
The corporation’s board of governors on Wednesday approved a proposed 14% rate increase overall for its policies.
The request is still subject to approval by Florida regulators.
Citizens was created by the Legislature for homeowners and businesses unable to find insurance on the private market. Its rate increases are capped under state law, although lawmakers in recent years raised those caps.
For 2025, the cap is 14% for a primary home and 50% for secondary homes, defined as those that are occupied nine months or less each year.
With so many residents using Citizens, the insurer’s payouts for damages could exceed its reserves, leading to even higher premiums for policyholders, Whitehouse said.
“Good luck with that,” (Senator Sheldon) Whitehouse, a Rhode Island Democrat, said. “Particularly if the surcharge goes to hundreds or even thousands of dollars.”
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This video from Yahoo News is a year old, but outstanding on this issue.
“Insurers are the climate change canary in the coal mine,” said Dave Jones, the former insurance commissioner in California and director of the Climate Risk Initiative at the University of California, Berkeley’s Center for Law, Energy, & the Environment. “While these policy and regulatory interventions might help in the short run, they’re likely to be overwhelmed by the increasing risk and loss.”
Industry leaders note that insurance companies have been hammered by heavy payouts — last year, 28 separate U.S. natural disasters caused at least $1 billion each in damage, according to federal figures — and say they simply can’t afford to provide coverage in the areas that face the highest risk.
Disaster costs are soaring. In the last five years, there have been 102 disaster events in the United States that caused at least $1 billion in damage. In the entire decade of the 1990s, there were 57 billion-dollar events (adjusted for inflation), and in the 1980s there were 33.
Even as some Florida homeowners are now shifting from the state-run plan back to the private market, industry experts say the nationwide surge in state-backed policies is troubling. If such plans exhaust their reserves, states impose an assessment on either all insurance companies or all individual policyholders — known in Florida as the “hurricane tax.”
Jones, the former California insurance commissioner, noted that insurers there are worried that growing wildfire risk could force them to bail out the state plan. Nearly 400,000 Californians rely on the state plan for insurance, and state officials have warned that a catastrophic event could wipe out its reserves.
While Californians struggle to find insurance on the private market, Jones called out the insurers that are dropping policies even as they retain financial ties to fossil fuel companies.
“Why are insurers investing in and writing insurance for the very industry that’s making it increasingly challenging for them to write insurance in certain parts of the country?” he said.
In Colorado, lawmakers voted last year to create a state-backed insurance plan like those in more than 30 other states. State Sen. Dylan Roberts, the Democrat who sponsored the bill, said he heard from constituents who were getting dropped by their insurers following the Marshall Fire that swept through Boulder County in 2021.
“We’re going to have more and more Coloradoans every year who are unable to find insurance for their property on the private market,” he said. “To have an insurer of last resort is something we hope isn’t used widely, but it’s something we need to have.”
Some consumer advocates believe states will have to get more involved. Amy Bach, executive director of United Policyholders, a nonprofit that advocates for insurance customers, said governments face the same difficult risk calculations as private companies but are tax-exempt and don’t face the same pressures to return high profit margins to shareholders.
“Publicly supported insurance programs are here to stay,” she said. “It behooves us to build them as smart as we can.”
In Washington state, regulators say they have only a few hundred policies on the state-backed plan, a sign that residents can still access coverage on the private market. David Forte, senior property and casualty policy adviser with the Office of the Insurance Commissioner, said the agency has added actuarial staff to speed up insurers’ rate revision approvals.
He also credited the work of state leaders who have invested millions to reduce wildfire risk. But he cited a 2022 wildfire that nearly swept through the town of Index, before shifting winds changed its direction.
“If that had happened, I think our property market would be different,” he said. “Are we just one bad event away? Probably.”
