Insurance premia ought to be one of the prime ways for the risks of climate change risk to be communicated to asset owners so as to influence location and risk mitigation decision whether hurricanes, river flooding, or wildfires. When state governments get involved in trying to shield owners from the cost of insuring against risk whether by price control of premia or subsidizing companies to keep rates artificially low we can expect problems.
It is unclear why Fannie Mae and Freddie Mac are going along with this.
Any hurricane-damage connection to climate change, as Brian Smith notes below, is almost impossible to make for several reasons - one being that the post 1990s rise in hurricane activity in the Atlantic/Caribbean is now more strongly connected to declines in aersol-style pollutants than heat-trapping CO2 (one of many recent papers on this: https://www.nature.com/articles/s41467-022-32779-y ) and a second being that ever more studies of hurricane patterns in and around Florida in centuries past show ebbs and surges in storm strikes with no evident climate relationship. See this Sustain What post and webcst with Florida hurricane scientist Jo Muller and environment reporter Craig Pittman for some of this: https://revkin.substack.com/p/as-idalia-approaches-a-live-look?utm_source=publication-search
The actual hurricane damage function in Florida must account for multiple cultural as well as geophysical factors, but I for one don't see how the rising trend of global heat content, manifested in higher sea surface temperatures for example, could not be having some impact! Of course it's difficult to numerically connect hurricane damage "in and around Florida" to anthropogenic global warming, because in such a limited area the internal noise, or the ebbs and surges as you say, have so far overwhelmed the climate-change signal. That was true for tropical cyclones globally as well, at least until recently, with the decrease in atmospheric aerosols in the 1990s, and the still-small sample size for such a statistically rare event, obscuring CO2-driven forcing (https://www.science.org/doi/full/10.1126/science.aaf6574). Yet an increase in tropical cyclone intensity, though not frequency, was an early prediction from theory (https://www.geo.utexas.edu/courses/387H/PAPERS/Emanuel,K.-Nature1987.pdf). By 2005, Emanuel found an increase in the potential destructiveness of storms since the mid-1970s (https://www.nature.com/articles/nature03906), and a 2020 PNAS paper identified "significant global trends in TC intensity over the past four decades" (https://www.pnas.org/doi/abs/10.1073/pnas.1920849117). The actuarial risks may be hard to compute, but tropical cyclones are clearly growing stronger and for-profit insurance providers are taking notice. That means Florida property owners must also.
The reason for the risk is not the issue. The State of Florida is interfering with the market allocation of risk and pawning off some of the cost on the rest of the country.
When insurers leave the market, homeowners often end up with the state's insurer of last resort, Citizens Property Insurance Corporation, which has rates capped by law, which in turn practically guarantees losses to the state-controlled insurer.
In 2022 and 2023, Florida passed insurance reforms intended to address the fraud and litigation problems - I haven't heard whether these have had any effect in getting insurers to return to the state.
But this is not caused by climate change. To be fair to Susan, she makes no such claim.
Can it be all of these issues, just as in California? Climate change increasing the risk, an unfavorable regulatory environment, and fraud/litigation abuses? The reforms will hopefully help, but insurers are realistic about rising risk. Steve Bowen writes extensively about this.
Insurance premia ought to be one of the prime ways for the risks of climate change risk to be communicated to asset owners so as to influence location and risk mitigation decision whether hurricanes, river flooding, or wildfires. When state governments get involved in trying to shield owners from the cost of insuring against risk whether by price control of premia or subsidizing companies to keep rates artificially low we can expect problems.
It is unclear why Fannie Mae and Freddie Mac are going along with this.
See: https://thomaslhutcheson.substack.com/p/climate-risk-and-insurance
Any hurricane-damage connection to climate change, as Brian Smith notes below, is almost impossible to make for several reasons - one being that the post 1990s rise in hurricane activity in the Atlantic/Caribbean is now more strongly connected to declines in aersol-style pollutants than heat-trapping CO2 (one of many recent papers on this: https://www.nature.com/articles/s41467-022-32779-y ) and a second being that ever more studies of hurricane patterns in and around Florida in centuries past show ebbs and surges in storm strikes with no evident climate relationship. See this Sustain What post and webcst with Florida hurricane scientist Jo Muller and environment reporter Craig Pittman for some of this: https://revkin.substack.com/p/as-idalia-approaches-a-live-look?utm_source=publication-search
The actual hurricane damage function in Florida must account for multiple cultural as well as geophysical factors, but I for one don't see how the rising trend of global heat content, manifested in higher sea surface temperatures for example, could not be having some impact! Of course it's difficult to numerically connect hurricane damage "in and around Florida" to anthropogenic global warming, because in such a limited area the internal noise, or the ebbs and surges as you say, have so far overwhelmed the climate-change signal. That was true for tropical cyclones globally as well, at least until recently, with the decrease in atmospheric aerosols in the 1990s, and the still-small sample size for such a statistically rare event, obscuring CO2-driven forcing (https://www.science.org/doi/full/10.1126/science.aaf6574). Yet an increase in tropical cyclone intensity, though not frequency, was an early prediction from theory (https://www.geo.utexas.edu/courses/387H/PAPERS/Emanuel,K.-Nature1987.pdf). By 2005, Emanuel found an increase in the potential destructiveness of storms since the mid-1970s (https://www.nature.com/articles/nature03906), and a 2020 PNAS paper identified "significant global trends in TC intensity over the past four decades" (https://www.pnas.org/doi/abs/10.1073/pnas.1920849117). The actuarial risks may be hard to compute, but tropical cyclones are clearly growing stronger and for-profit insurance providers are taking notice. That means Florida property owners must also.
The reason for the risk is not the issue. The State of Florida is interfering with the market allocation of risk and pawning off some of the cost on the rest of the country.
Susan, Andrew Dressler has cross-posted this to claim that the insurance problems are caused by climate change - a claim you do not make.
This claim utterly unsupported.
There is no indication that this has anything to do with climate change. A few seconds with the Google finds numerous sources (e.g. https://www.bankrate.com/insurance/homeowners-insurance/florida-homeowners-insurance-crisis/#crisis) claiming that insurers have left Florida because of losses due to rampant fraud and costly litigation, abetted by a hostile regulatory environment.
When insurers leave the market, homeowners often end up with the state's insurer of last resort, Citizens Property Insurance Corporation, which has rates capped by law, which in turn practically guarantees losses to the state-controlled insurer.
In 2022 and 2023, Florida passed insurance reforms intended to address the fraud and litigation problems - I haven't heard whether these have had any effect in getting insurers to return to the state.
But this is not caused by climate change. To be fair to Susan, she makes no such claim.
Can it be all of these issues, just as in California? Climate change increasing the risk, an unfavorable regulatory environment, and fraud/litigation abuses? The reforms will hopefully help, but insurers are realistic about rising risk. Steve Bowen writes extensively about this.
In theory, I suppose it could. But I've seen no one argue this is the case, backed by anything other than speculation.
Thanks for the tip to Steve Bowen. I'll read Gallagher Re's Q1 report.
I’ve been telling our state legislators that insurance is the canary in the climate change coal mine and that they need to pay attention