Firefighters battle flames at the Eaton Fire on January 7, 2025 in Pasadena, California, USA.
Mario Anzuoni | Reuters
Climate-related natural disasters are driving up insurance premiums for homeowners in the hardest-hit areas, according to a Treasury report released Thursday.
The ministry conducted a huge study covering the period from 2018 to 2022, including data from then on, and found that there were 84 disasters that caused damage of more than $1 billion, excluding floods, and the total damage was 609 billion dollars. It was revealed that the amount would rise to US$. Floods are not covered by homeowner’s insurance.
During this period, policy costs for all categories increased 8.7% faster than the inflation rate. But most of the burden fell on people living in areas hardest hit by climate-related events.
Consumers living in the 20% of ZIP codes expected to experience the highest annual losses paid an average of $2,321 in premiums, which was 82% higher than consumers living in the 20% of ZIP codes with the lowest risk.
“Homeowners insurance will become increasingly expensive as the cost of climate-related events becomes a challenge for homeowners and insurers alike,” said Nellie Liang, Under Secretary of the Treasury for Domestic Finance. “It’s becoming less accessible to consumers.”
The report comes as rescue workers continue to battle wildfires raging in the Los Angeles area. At least 25 people were killed and 180,000 homeowners were forced to evacuate.
Treasury Secretary Janet Yellen said that while the cost of the fire was not yet known, the report reflected a serious ongoing problem. During the period studied, the total number of annual disasters declared as climate-related events was almost double the period from 1960 to 2010 combined.
“Furthermore, this (wildfire disaster) is not the only evidence of this impact; other climate-related events, from severe storms in the Great Plan to hurricanes in the Southeast, are making insurance affordable for Americans.” “It’s a challenge in finding the right people,” Yellen said. said in a statement. “This report reveals alarming trends in rising insurance premiums, all of which threaten the long-term prosperity of American families.”
Both homeowners and insurance companies in the worst-hit areas found other ways to pay.
Non-renewal rates in the highest-risk areas were approximately 80% higher than in lower-risk areas, but the average claims paid by insurers for high-risk areas was $19,000 compared to $19,000 in the lowest-risk areas. In the at-risk area it was $24,000.
Claims were filed 20% more frequently than the national average in the Southeast, which includes states such as Florida and Louisiana, which are frequently affected by hurricanes.
In the Southwest, including California, wildfires ravaged 3.3 million acres during the same period, with five fires causing more than $100 million in damage. The average claim amount was about $27,000, nearly 50% higher than the national average. The insurance non-renewal rate was 23.5% higher than the national average.
The Ministry of Finance announced the results of the investigation with three days remaining in the current administration’s term. Treasury officials said they hope President-elect Donald Trump’s administration will use the report as a starting point for action.
“We certainly hope that our successors will continue to focus on this issue, continue to do important research on this issue, and continue to think of important and creative ways to address it. ” said the official.
