Climate change and rising US insurance rates

A new article directly blames climate change for rising US insurance rates.

While the article looks at the various and many reasons for rising rates, it evokes what the author sees as a “common thread” that connects rising rates and a world where the weather seems to be getting more and more extreme.

“Climate change is fueling more severe weather, and insurers are responding to rising claims,” ​​writes author Andrew J. Hoffman for The Conversation. “The losses are exacerbated by more frequent extreme weather disasters hitting densely populated areas, rising construction costs and homeowners facing damage that was once again rare.”

He points to the emergence of more damaging hailstorms, larger storm surges, massive wildfires and severe heat waves for increasing risks and therefore rising rates.

“Increasing global temperatures are leading to more extreme weather and that means insurance companies have had to pay out more. In turn, they raised prices and changed coverage to remain solvent,” writes Hoffman. “It raises costs for homeowners and everyone else.”

The Conversation article lists 26 states where the average homeowner’s insurance premium increased more than 25% from 2017 to 2023, using data from S&P Global and the Minneapolis Federal Reserve.

Rates in Texas (up almost 60%), Colorado, Arizona, Utah and Nebraska led the list.

Climate and AI

New research examines changes reshaping the insurance industry and how it views risk, driven by the dangers of climate change and new predictive technologies.

ZestyAI surveyed more than 200 property/casualty insurance professionals about risk assessment methods, what insurers expect from AI-based models, how carriers view transparency and regulatory adoption, and top issues of risk to the industry.

“Increasingly frequent and severe natural catastrophe events such as convective storms and wildfires are raising major concerns in the insurance industry and

challenging carriers to find more accurate and proactive methods to predict and manage climate risk,” states ZestyAI’s State of the Industry report.

The survey shows that 54% of respondents use traditional actuarial models based on historical claims data, 30% use stochastic models and 18% use AI and machine learning models.

Respondents disagreed on which type of model is most accurate for predicting risk: 27% thought traditional actuarial models were the most accurate; 26% favored stochastic models; 20% believe that artificial intelligence and machine learning are the most accurate. More than a quarter (27%) of respondents say that a combination of different models provides the best risk prediction.

The percentages for preferred model types varied depending on whether a company was an insurer, a reinsurer, or an Insurtech.

“When the numbers were examined more closely, it was found that reinsurers and insurers are convinced that AI models are helping to better manage climate-related losses,” the report said.

Storms of Europe

Climate change has made deadly floods in Europe worse and more likely, according to a Bloomberg article in this week’s Insurance Journal.

A report by the World Weather Attribution shows that the record rainfall and resulting flooding in Europe earlier this month was twice as likely due to climate change.

Flooding hit Europe when Storm Boris hit the region on September 12, affecting Poland, Romania, Slovakia, Austria, the Czech Republic and Germany, according to the article.

“Our study found the signatures of climate change in the bursts of precipitation that flooded central Europe,” Joyce Kimutai, a researcher at Imperial College London and one of the report’s contributors, told Bloomberg. “Once again, these floods highlight the devastating results of fossil fuel-driven warming.”

The researchers used weather data and climate models to show how climate change is affecting weather patterns, and compared the probability and intensity of rainfall with that of the climate before the current warming trend.

“We need to prepare for even heavier rainfall than predicted in these models,” said WWA co-leader Friederike Otto.

Site at sea level

A new federally funded website designed to help communities prepare for rising seas lets users punch in their state, city or region to see where the risks are, as well as get recommended strategies to mitigate the consequences.

The US Interagency Task Force on Sea Level Change launched the US Sea Level Change website on Monday.

The site explains the latest sea level science in a Sea Level 101 section, including impacts on the environment and coastal communities.

A National Sea Level Explorer section allows users to analyze the data and see the results of climate change.

Punch in San Francisco, California, for example, and the site tells users that sea levels have risen 4 inches since 1970. Under an intermediate climate change scenario, sea levels are expected to rise by 7 inches from 2020 to 2050.

Boston, Massachusetts has seen 8 inches of sea level rise since 1970. Levels are expected to rise 11 inches in an intermediate scenario by 2050.

There were 35 minor high-tide flood days in the 1970s. In 2050, Boston is projected to see up to 70 minor flood days per year, according to the site.

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