The U.S. Senate Budget Committee convened on Wednesday to explore the growing impact of climate change on the insurance industry, focusing on a study that highlighted increasing non-renewal rates of homeowner insurance policies across various states. The hearing, led by Chairman Sen. Sheldon Whitehouse (D-R.I.), was titled “Next to Fall: The Climate-Driven Insurance Crisis is Here – And Getting Worse,” and underscored the urgency of the issue at hand. The findings were derived from non-renewal data collected over five years from 23 insurers, representing about two-thirds of the homeowners insurance market.
From 2018 through 2023, the study revealed a clear correlation between climate change and increased insurance non-renewal rates, showing that traditionally high-risk states like Florida, Louisiana, California, and Texas are not the only ones affected. Other regions such as the Carolinas, New England, Oklahoma, the Northern Rockies, and Hawaii are also experiencing significant impacts. The committee’s report stressed the pervasive influence of climate change on the insurance sector as a whole. Homeowners in various states are facing higher insurance non-renewal rates and premiums due to escalating climate-related risks.
Rising Non-Renewal Rates Across the Nation
The increasing urgency of the insurance crisis becomes evident when examining the data collected by the committee, which exhibited a clear escalation in non-renewal rates across a broad range of states. While Florida had the highest average rate of non-renewals, Texas was notably absent from the top ten. This broadened geographic impact highlighted that climate-related factors destabilizing insurance markets permeate beyond coastal states. Sen. Whitehouse underscored the urgency of these findings, emphasizing that the insurance crisis is not a distant future occurrence but a present and worsening reality.
The committee’s comprehensive analysis demonstrated that even inland regions with previously lower climate risk are now experiencing heightened insurance challenges. As non-renewal rates rise and premiums increase, the variability of climate-related incidents is forcing these regions to adapt rapidly to new insurance landscapes. The widespread influence of climate change underscores the necessity for both immediate and long-term solutions aimed at mitigating these impacts.
Industry Experts Offer Counterarguments
Not everyone agreed with the committee’s conclusions, however. Robert Hartwig, a professor of risk management and insurance expert, argued that the industry is not facing an imminent climate-driven crisis nor is it on the verge of collapse. Hartwig, who previously held the position of president of the Insurance Information Institute, acknowledged that while catastrophe losses have notably increased, this does not predict an impending industry failure. He pointed to circumstances specific to states like Florida and California, as well as factors such as inflation, litigation, fraud, and population growth, as significant contributors to the rising non-renewal rates.
Adding another layer to the debate, the National Association of Mutual Insurance Companies (NAMIC) criticized the hearing for politicizing the insurance issue. Senior vice president Jimi Grande suggested that the session overlooked the interplay of various factors driving up costs for insurers and policyholders, such as extreme weather events, inflation, economic instability, and legal system abuses. Grande argued that the hearing did little to address climate change or protect consumers from insurance cost increases tied to policy decisions, calling into question the credibility of the committee’s findings.
Economic and Regulatory Factors
Further perspectives from industry experts reiterated the complex nature of the insurance market’s current challenges. David A. Sampson, president and CEO of the American Property Casualty Insurers Association (APCIA), noted that escalating property insurance losses are influenced by factors beyond just weather. He underscored the profound impact of 40-year high inflation on insurance affordability and other drivers such as overbuilding in high-risk areas, legal system abuse, and rising regulatory costs. According to Sampson, solely analyzing homeowners’ insurance non-renewal data does not effectively establish a direct link between rising insurance losses and climate risk.
Sampson also highlighted the critical role of government intervention and the associated risks in determining whether consumers have access to competitive private insurance policies or are pushed towards government-established residual markets. The perspectives provided by these industry experts highlighted the multifaceted challenges faced by the insurance market, underscoring the need for a holistic approach to addressing these issues. They called for an analysis that encompasses all contributing factors, including inflation, population dynamics, and legal and economic stability.
Testimonies from the Field
Offering a firsthand account, Ernest Shaghalian Jr., an independent insurance agent from Rhode Island, testified about the deteriorating insurance marketplace in his state. With a career spanning 40 years, Shaghalian has observed significant increases in non-renewals, particularly in coastal communities, and the departure of two insurers from the market. He advocated for states to mandate more advanced notice from insurers prior to withdrawing from territories, suggesting that current trends indicate insurers’ concerns about the future trajectory of the market.
Shaghalian’s testimony provided valuable insights into the practical challenges faced by insurance agents and policyholders alike. His firsthand experience highlighted the necessity for regulatory reforms designed to protect consumers and ensure the stability of the insurance market. Addressing both climate change and other contributing factors, such as economic conditions and legal dynamics, is crucial for creating a more resilient insurance industry.
The Need for a Holistic Approach
The U.S. Senate Budget Committee met on Wednesday to examine the growing impact of climate change on the insurance industry. The focus was on a study showing rising non-renewal rates of homeowner insurance policies in various states. Chairperson Sen. Sheldon Whitehouse (D-R.I.) led the hearing, titled “Next to Fall: The Climate-Driven Insurance Crisis is Here – And Getting Worse,” highlighting the urgency of this issue. The findings were based on five years of non-renewal data from 23 insurers, covering about two-thirds of the homeowner’s insurance market.
From 2018 to 2023, it was evident that climate change correlated with higher insurance non-renewal rates. Traditionally high-risk states like Florida, Louisiana, California, and Texas were notably affected, but so were other regions such as the Carolinas, New England, Oklahoma, the Northern Rockies, and Hawaii. The committee’s report highlighted climate change’s wide-ranging impact on the insurance sector. Homeowners in various states are now facing increased non-renewal rates and higher premiums due to the growing climate-related risks.
