Why are Property Insurance Rates Increasing Faster than Inflation?

 Climate-related disasters cost all of us, even when we are not directly affected.

"The National Oceanic and Atmospheric Administration tracks weather-related disasters in the U.S. that cause more than a billion dollars’ worth of damage. According to NOAA:

In the 1980s, the U.S. saw an average of 3 such disasters per year. 

In the 1990s, the average was 5 per year;

In the 20002, it was 6; 

In the 2010s it jumped to 12. (The $ amounts are been adjusted for inflation.) 

In 2020, a record-shattering 22 disasters costing more than a billion dollars struck the country. 

In 2022 we are on pace to match that record, with 15 such disasters by October, including Hurricane Ian, which is likely to prove one of the most expensive storms in American history. 

Adam B. Smith, a NOAA researcher, has written that a disastrous number of disasters “is becoming the new normal.” The rise is partly a function of more people living in vulnerable areas, such as floodplains. But increasingly it’s a function of climate change."

"In the future, the costs may climb steeply or they may climb precipitously. All our infrastructure has been built with the climate of the past in mind. Much of it will have to be rebuilt and then, as the world continues to warm, rebuilt again."

Comment: Now is NOT a good time to buy South Florida real estate... or coastal property anywhere. Climate change/disruption is here now; not sometime in the future. And it is costing all of us in the form of higher property insurance rates (even if we live far from these disasters because insurance companies spread the costs) and because our state and federal taxes help alleviate the damage once it occurs. The tax dollars spent on disasters could provide other services to Americans.

Data source: The New Yorker, Climate Change form A to Z, by Elizabeth Kolbert November 21, 2022.