FL - New study warns of ‘climate insurance bubble.’ Is that driving costs up in Florida?
Florida already has deep property insurance problems. Rates are skyrocketing for tens of thousands of homeowners.
Four private companies have abandoned the state this year, a dozen more have gone belly up in recent years and others have limited coverage after a string of devastating hurricanes, including Ian last year — the most expensive storm in state history.
Business has consequently exploded for Citizens, the state-run insurer of last resort, and so has the risk of financial trouble for Florida if a major metro area like Miami or Tampa takes a bad hit.
A new study and a string of recent financial and industry reports suggest it could get even worse for Florida and other states like California and Louisiana hammered by natural disasters like wildfires, floods and hurricanes.
The latest study, released Wednesday by the First Street Foundation, warns of a looming “climate insurance bubble” — a double whammy of rising rates and rising risks that potentially could have major economic ripple effects on Florida’s housing market and economy.
A bursting bubble would work this way: If rising risks from hurricanes and other climate-drive disasters make insurance too expensive for people to buy homes, or banks to give mortgages to homes in vulnerable spots, it could set off a spiral of declining demand and declining property values.
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The report from First Street, a non-profit that analyses climate threats, suggests some 39 million homes across the country could lose value as insurers begin to calculate climate risks into premiums.
“The biggest problem is we’ve been subsidizing insurance and risk for so long, which ended up ultimately promoting development in risky areas for the last half century or so,” said Jeremy Porter, First Street’s director of research and development.
“We’ve built up a climate debt that hasn’t been paid yet.”
Judging by soaring home prices in South Florida and across much of the state, the threat of a bubble hasn’t had a major impact on the real estate market — at least yet — though consumer complaints about insurance costs have exploded.
But First Street isn’t alone in warning about climate change’s impacts on the already shaky property insurance markets in Florida and other states.
Moody’s Investor Services, in a September report, outlined how the companies that financially back insurance companies are already factoring climate risk into their rising rates, which get passed directly to consumers.
