A new storm is brewing in a fight over climate change: home insurance

A new storm is brewing in a fight over climate change: home insurance

I knew my insurance company was filing for bankruptcy on Friday, too late to do anything about it, so I called my insurance agent the following Monday morning. Her response, given politely and compassionately, was effective, "Be in class." It was dealing with the fallout from two other companies declaring bankruptcy and had to address their customers before the end of the month. My company wasn't canceling policies until the middle of the following month, so I had a little time on my side.

I am not alone in this insurance disaster; My insurance company was the seventh to file for bankruptcy in Louisiana this year. While insurance is a complex industry, with actors ranging from individual taxpayers to domestic regulators and international reinsurers, one element stands out in this loop: climate change.

The effects of climate change on Louisiana are something I know firsthand. I work in a marine lab on the state's eroded coast, and for the past 15 years, I've seen climate change data and damage firsthand. In 2020, Louisiana was in the "cone of uncertainty" - the area that could experience a tropical cyclone - a record seven times. One of these storms, Hurricane Laura, was one of the two most powerful storms to hit Louisiana in recorded history. The following year, Hurricane Ida hit or exceeded Laura's strength, causing widespread devastation across the state's central coast and many inland areas.

Take this list in the context of recent storms that have hit nearby areas — like Hurricane Harvey in Houston and Hurricane Michael in northwest Florida — and the North Bay looks like a risky bet for insurers. While companies can theoretically raise premiums to match the risks, not many people can afford those higher rates in practice. Faced with huge losses and the inability to raise insurance premiums, companies declare bankruptcy. In the case of my insurer, for example, they declared bankruptcy when Florida, where they also insure, rejected their attempt to increase premiums by 85 percent.

Several people I know have also looked for new insurance, which they should be able to get from a state-run insurance plan, albeit at a higher cost. I got new insurance through this plan - with an increase in premiums of nearly $2,000. While I was told I have to get a refund for the remaining six months of my old policy - roughly $2,500 more, I have no real idea when to receive this check. The government agency responsible for supporting insurance companies recently announced that it hopes to sell $600 million in bonds to cover claims from now-bankrupt companies. The finances of all this are complicated and messy, and it's not always clear how all ends will meet.

Ironically, the current insurance catastrophe deviates from the well-known flood risks in the state. After Hurricane Katrina in 2005, federal, state, and local authorities spent billions to reduce coastal flood risks and rebuild the state's vanishing coast. These efforts have been relatively successful. In some cases, they have even helped make flood insurance more affordable, but they have little impact on the current situation. This is because flood risks are managed differently than other risks faced by homeowners. Flood insurance is administered through a federal program, and private companies are outside the flood insurance market. Questions about the federal government's new flood risk classification system are also emerging.

The damage to Louisiana's private insurance companies mainly came from the storm's winds, not rising waters. It's a reminder that climate includes everything in the air and water around us - and that the entire climate is changing.

My biggest concern is that this issue could grow nationally. While Louisiana's climate hazards are at the higher end of the spectrum, many places aren't that far. Florida already has similar problems, and California has fire-related issues. I worry that other storm-prone locations in the Carolinas, the mid-Atlantic, or perhaps even New England won't be too far behind. It reminds me of what a friend of mine, John Ettinger, who specializes in coastal restoration, says, "Places will be submerged before they are actually submerged." Here in Louisiana, the waters are high both physically and financially, and even if you don't live here, you must keep an eye on where they go.