A new storm is brewing in the fight against climate change: homeowner’s insurance

I learned that my insurance company was filing for bankruptcy too late on a Friday to do anything about it, so I called my insurance agent first the next Monday morning. His response, given in a polite and compassionate way, was effectively: “get in line”. He was dealing with the fallout of two other companies that were filing for bankruptcy and their clients were to be contacted by the end of the month. My company wouldn’t cancel the policies until the middle of the next month, so I had some time on my side.

I’m not alone in this insurance debacle; my insurance company was the seventh company to file for bankruptcy in Louisiana this year. Although insurance is a complicated industry, with players ranging from individual taxpayers to local regulators and international reinsurance companies, one element stands out in this episode: climate change.

The impact of climate change on Louisiana is something I know firsthand. I work in a marine laboratory on the eroding coast of the state and for the past 15 years have seen firsthand the data and damage of climate change. In 2020, Louisiana was in the “cone of uncertainty” – the area that could experience a tropical cyclone – a record seven times. One such storm, Hurricane Laura, was one of the two strongest to hit Louisiana in recorded history. The following year Hurricane Ida struck, equaling or surpassing Laura’s strength, causing widespread destruction along the central coast of the state and even in many inland regions.

Take this list in the context of the storms that have hit nearby areas in recent years – such as Hurricane Harvey in Houston and Hurricane Michael in Northwest Florida – and the Northern Gulf seems like a risky bet for insurance companies. While companies could theoretically raise premiums to cope with risk, in practice many people cannot afford those higher rates. Faced with huge losses and unable to raise premiums, companies go bankrupt. In the case of my insurance company, for example, they filed for bankruptcy when Florida, where they also insure, denied their attempt to raise premiums by 85%.

Many people I know have also sought out new insurance, which they should be able to get from the state insurance plan, albeit at a higher cost. I got new insurance through this plan, with a premium increase of nearly $ 2,000. Even though I have been told that I should get a refund for the remaining six months of my old policy – about another $ 2,500, I have no real idea when that check will come. The state agency charged with stopping insurance companies recently announced that it hopes to sell $ 600 million in bonds to cover the claims of companies that are now bankrupt. The finances of all of this are complex, messy, and it’s not always clear how all ends will meet.

Ironically, the current insurance debacle diverges from the state’s well-known flood risks. In the years since Hurricane Katrina in 2005, federal, state and local authorities have spent tens of billions of dollars to reduce coastal flood risks and rebuild the state’s endangered coast. These efforts have been relatively successful. In some cases, they have even helped make flood insurance affordable, but they have little to do with the current situation. This is because flood risks are managed differently from other risks homeowners face. Flood insurance is run by a federal program, private companies are generally out of the flood insurance market. Questions are also emerging about the federal government’s new flood risk assessment system.

The damage that challenged Louisiana’s private insurers came mostly from the winds of a storm, not its rising waters. It’s a reminder that climate involves everything in the air and water around us and that the entire climate is changing.

What worries me most is that this problem could grow nationwide. While Louisiana’s climate hazards are at the higher end of the spectrum, there are many places that aren’t that far off. Florida is already having similar problems and California has related problems due to the fires. I’m afraid other storm-prone places in the Carolina, mid-Atlantic or perhaps even New England won’t be too far behind. All of this reminds me of what a friend of mine, coastal restoration specialist John Ettinger, says: “Places will be financially underwater before they are physically underwater.” Here in Louisiana, the waters are rising physically and fiscally, and even if you don’t live here, you should watch where they go.

Alexander S. Kolker, Ph.D., is an associate professor at the Louisiana University Marine Consortium. He studies climate change, sea level rise, resilience and change in coastal systems. His work is based on the shores and wetlands of the Mississippi River Delta, and he has also worked in systems around the world, including the Florida Everglades, New York and North Africa. His work involves a combination of field studies, data analysis and theoretical work.

Leave a Reply

%d bloggers like this: