In his opening statements before a hearing on the property insurance market and its impact on consumers, Sen. Sherrod Brown (D-Ohio), chair of the Senate Committee on Banking, Housing, and Urban Affairs, voiced his concerns about how the property insurance market is impacting consumers and their ability to afford and maintain their homes.
Since the beginning of the year, the U.S. has had 15 weather disasters, each resulting in losses of more than $1 billion. Insurance provider Swiss Re estimated severe storms resulted in $34 billion of insured losses in the first two quarters of this year. This is the highest loss ever recorded for a six-month period, Brown said.
Citing the wildfires in Hawaii, Hurricane Idalia in the southeast, and floods in the northeast, Brown said the changing weather patterns are causing risk and exposure to extend to places not previously prone to natural catastrophes. He noted this has led insurance companies to re-evaluate risk concentration levels.
As companies do their evaluations, some have been restricting coverage, raising rates and deductibles, and even leaving entire states or locations altogether.
“Homeowners who have spent years making their payments are shocked to find that their insurer has raised costs, limited coverage, or won’t renew their policy at all,” Brown said. “Some insurers have abandoned entire markets – leaving consumers with fewer options that cost more and provide less coverage. And consumers are counting on their insurers now more than ever.”
Reinsurance rates have increased up to 50 percent, Brown said. High reinsurance rates mean higher costs for insurance companies, which then are passed on to the consumers. Insurers pulling out of states like California and Florida cite spiking reinsurance rates as factors in their decisions, as well as the growing risks of catastrophe. Florida has been hit particularly hard, with 14 insurance companies having either left the state or having entered into the receivership process.
As these companies exit, consumers are left to seek coverage from state-mandated insurers which provide bare-bones policies at typically higher costs.
“Insurers of last resort are exactly that – a last resort,” Brown said. “That used to mean that these insurers had a small share of policies. But as climate risk exposure has increased, insurers of last resort are growing.”