The increased risk of extreme weather events, combined with rampant fraud, is making Florida 'uninsurable'—a fate that might await other states in the future.
Climate change—which has been identified as a likely cause of the increase in the frequency of storms and hurricanes—means that the risk for homeowners and their insurers, especially those in areas prone to experience extreme weather events, is constantly growing, and it's difficult to estimate in the long term.
That is easier said than done."In order to prepare for those events, they need to build up their capital reserves so that they can handle all these claims all at once," Liao said."And that is financially very hard to do and it's very costly for them.""Wildfires, hurricanes, sea-level rising—those kinds of risks are generally considered less insurable," Liao said.
This, in turn, increases the difficulty for people to buy a house in Florida—already one of the most overvalued housing markets in the entire country—or they can get more expensive coverage provided by the state's FAIR Plan. "We have to fundamentally change how we reprice, how we look at risk, and how we're investing from a mitigation and adaptation standpoint," he continued, saying that this might still not be enough for everyone to be able to afford new insurance premiums.
According to Nyce, the insurance crisis could expand to the lower Southeast and the upper Midwest in future,"where insurance companies may decide to start pulling back as well."
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