#530
Cover or Run
Published:
Mar 11, 2024
Author:
Sarah Parsons Wolter
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Climate change is exerting unprecedented pressure on the US home insurance market, particularly in areas prone to wildfires and hurricanes. As traditional insurers retract from these high-risk zones and premiums increase, state-run 'insurers of last resort' have been forced to absorb trillions of dollars in risk.
Homeowners in the riskiest places are now more likely to be covered by state insurance programs, which provide protection where private companies won't. Since 2018, these plans have more than doubled their market share and their liabilities crossed the $1t threshold for the first time in 2022.
In some states, homeowners' insurance premiums have skyrocketed to levels that residents are unable to afford. The growth in homeowners’ insurance rates in Texas outpaced that of the rest of the nation last year, leading to an increase in the rate of uninsured homes. After the recent wildfires, Texans without home insurance may find it particularly challenging to restore their financial well-being, making them among the most vulnerable.
As a result, this challenging landscape presents opportunities for innovation in risk assessment and insurtech to address the growing gaps in coverage and financial risk management. We wonder if insurance companies will start rethinking how they assess risk or if they will continue to run away from these areas.
Portfolio News
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Cover or Run
A hidden crisis in US housing - A growing number of insurers are cutting their business in high risk areas, deterred by more intense and frequent natural disasters, plus state-imposed limits on how much they can charge. Homeowners in the most risky places are now more likely to be covered by state-created, “last resort” insurance programs that provide protection where the private market won’t. Read more
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Industry News
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Select Financings
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