Insurance Costs Spike in High Climate-Risk States

The perfect storm? Weather-related property losses and mounting climate woes lead insurers to chart a new course.


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Weather-related property losses are growing in numbers, especially across high-risk states such as Florida and Texas. Events including winter storms, fires and hurricanes are not only becoming an increasingly pressing issue for existing properties but also for new development and investment opportunities.

A new Yardi Matrix Bulletin explores climate-risk in vulnerable states and the impact of rising property insurance costs. While insurance rates are increasing across the nation, some insurers in high-risk states are increasing rates by around 100 percent or avoiding the area all together.

Insurance is rising in cost while simultaneously decreasing in coverage. Meanwhile, the problems related to climate events are also mounting. As population and development density increases so does the devastation caused by weather-related events.

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In a study published in the Nature Climate Change journal, referenced in the bulletin, residential homes in flood zones are overvalued by some $131 billion to $237 billion. The growth in property values, coupled with inflation, high construction costs and supply-chain issues is likely to lead to insurers increasing their scrutiny of payouts.

Certain efforts have the potential to combat the issue of rising insurance costs, such as reduced litigation. Most impactful, however, would be lender reform. Read more about increasing climate-related losses and what can be done to combat insurance costs in the new bulletin from Yardi Matrix.

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