Insurance Industry Faces Growing Climate and Natural Disaster Challenges Nationwide
Thursday, June 29th, 2023 Catastrophe Insurance IndustryThe insurance industry is increasingly wary of the risks presented by climate and natural disasters, prompting major firms to scale back their presence in more vulnerable states.
In June, Farmers Insurance announced in a company memo it will no longer write new property insurance policies in Florida, citing ‘catastrophe costs … at historically high levels.’ Earlier in the month, AIG stopped issuing policies along the Sunshine State’s hurricane-vulnerable coastline.
Those followed State Farm, California’s largest single homeowners’ insurer, which in May announced a moratorium on new policies in the state, blaming ‘rapidly growing catastrophe exposure.’ The decision came after years of devastating wildfires have sent insurance rates in California skyrocketing.
In testimony before the Senate Budget Committee in March, Eric Andersen, CEO of consulting firm Aon PLC, said that reinsurance companies, the firms that help insurers pay out costs, have also stepped back from high-risk areas, particularly those vulnerable to flooding and wildfires.
‘Just as the U.S. economy was overexposed to mortgage risk in 2008, the economy today is overexposed to climate risk,’ he said.
