‘An uninsurable future': Here's the real cost of a $500 billion hurricane season

Americans in hurricane-prone states have faced an onslaught of severe storms in recent years, and this season was no different.

Storms ravaged the southeastern United States, with estimates of $500 billion in damage and long-term economic loss according to AccuWeather. That's almost 2% of the country’s gross domestic product.

Four of five hurricanes that made landfall in the U.S. cost over a billion dollars in damages, Helene and Milton included. Moody's Insurance Solutions estimates the two storms alone cost insurance companies more than $35 billion.

These devastating costs are being felt by homeowners in high-risk areas, some of whom have been abandoned by private insurance companies and have seen exorbitant premiums from those that remain.

And with Americans already struggling with a challenging housing market, mounting insurance costs are only adding to the burden of buying a home -- and experts are warning that without action, certain areas of the country may soon become uninsurable.

Because we're not transitioning fast enough from fossil fuels and other greenhouse gas emissions, we're marching steadily toward an uninsurable future.

Dave Jones, director of the Climate Risk Initiative at UC Berkeley

The personal cost of severe storms

Residents of hurricane-prone states know this year's hurricane season follows nearly a decade of costly storms. Since 2016, there has been at least one billion-dollar hurricane or tropical storm in the U.S. every year.

As storms become more expensive, so does insurance. Homeowners insurance rates have increased an average of 38.6% in Gulf Coast states over the last five years, according to data from S&P Global Marketing Intelligence.

"That's really been one of the big drivers of insurance costs across the country — more losses, more expensive events that lead to higher rates," said Mark Friedlander, director of corporate communications for the Insurance Information Institute.

In 2023, hurricane-prone states Florida and Louisiana were among the most expensive states for homeowner's insurance. 

Perhaps even worse than being saddled with high insurance costs, some homeowners in high-risk areas have been dropped by their insurers entirely.

Last year, Farmers Insurance Group announced it would stop writing new policies in Florida, citing the hurricane-prone state's risky insurance market. This is just one of several national insurance companies that have restricted coverage in Florida and other high-risk states.

Tommy Crivello, who has worked in appraisal and brokerage in Florida for 22 years, says insurance is a rising problem. In the past, Crivello explains, prospective buyers' largest hurdle was qualifying for a mortgage. These days it's affording homeowner's insurance.

Crivello himself just purchased a home, and already his premium has skyrocketed and he has been dropped by private insurers. He explains that many of his clients are choosing to self-insure, but this option is expensive and often not available for homeowners who plan to take out a mortgage.

"You have no say, no power, no nothing. They want to drop you, they drop you," Crivello said. "There should be more legislation or some kind of regulatory governing agency that oversees that... There's no price gouge or nothing but you got to pay it or you can't get a loan."

You have no say, no power, no nothing. They want to drop you, they drop you.

Tommy Crivello, Florida homeowner

Friedlander says insurance companies withdraw due to state regulations on insurance rates. In high-risk areas, regulated rates can cause major losses for insurers.

"If insurers are not allowed to charge an actuarially sound rate, which has happened in many states... You're going to have insurers pull back on those markets because they are suffering losses," Friedlander said.

Protection for high-risk homes

Homeowners who have been dropped by private insurers can turn to Fair Access to Insurance Requirements, or FAIR, plans. These programs are backed by local governments in 35 states and have expanded as private insurers limit their coverage.

In Florida, the state-run Citizen's Property Insurance became the largest insurer during a statewide insurance crisis. But FAIR programs are typically considered a last resort, as they are expensive and may not offer the same coverage as private insurers. 

Dave Jones, director of the Climate Risk Initiative at UC Berkeley, is encouraging government to develop plans to make FAIR plans more accessible, like federal reinsurance or grants for low-income households.

Homeowners can also reinforce their homes against extreme weather. The Insurance Institute for Business and Home Safety's FORTIFIED homes program outlines home construction standards to protect against severe weather.

University of Alabama researcher Lawrence Powell studied FORTIFIED homes during Hurricane Sally in 2020. His preliminary findings show that in Alabama, where insurance companies reduce rates for homes that meet FORTIFIED standards, home hardening resulted in a 65% reduction of costs for insurance companies and 55% reduction of cost for policyholders.

Organizations in high-risk areas sometimes offer grants for home hardening, like Strengthen Alabama Homes and My Safe FL Home. The Federal Alliance for Safe Homes provides a tool that outlines weather reinforcement options for homes in different risk areas.

Jones also urges homeowners to vote for officials and policies that will mitigate climate change. He argues insurance companies must cease coverage for fossil fuel companies and stop investing in the root cause of worsening extreme weather.

"Because we're not transitioning fast enough from fossil fuels and other greenhouse gas emissions, we're marching steadily toward an uninsurable future," Jones said.

How a changing climate is impacting insurance rates

A severe hurricane season is not a new problem, but it will likely become more common. As the planet warms, scientists say the U.S. will see more Category 3-5 storms per season.

Hurricane specialist Phil Klotzbach explains that more and more storms are intensifying at rates higher than 60 mph in 24 hours. Hurricane Milton, for instance, saw wind speeds rise 95 mph in a single day.

"How it shifts those extremes, that’s where warming makes a difference," Klotzbach said.

A warmer atmosphere can hold more moisture, and NOAA reported that record-breaking rainfall from Helene was 10% heavier due to climate change. Heavy precipitation from storms like Helene and Milton can cause significant flooding, which is already worsened by sea level rise on the coasts.

Along with expensive hurricane seasons, areas of the U.S. are also facing worsening destruction from wildfires and convective storms. States across the country are seeing private insurers restrict coverage and hike up premiums.

"Insurance rates are the one signal we have economically that climate change is real and it's having a real impact,"  Jones said.