Understanding the Changing Landscape of the Insurance Market in a Climate-Altered World: Insights from Yale Climate Connections

Climate change is a major factor leading to the crisis in the world of property insurance. While rising real-estate values and rebuilding costs contribute too, the effects of more frequent and intense extreme weather events are undeniable. From wildfires, larger hail, bigger winds, stronger hurricanes, torrential rains, and blizzards, to inland and coastal flooding, all these events are on global warming steroids. And so insurance rates keep rising, coverage becomes harder to acquire, compensations get smaller and more vexing, mortgages get harder to find and pay for, and both individuals and companies suffer as the new conditions force adjustments and lead to new and larger losses.

Most of these articles cover the current situation, especially in the U.S., though the case is similar in other countries where individual property insurance is common. The last set covers one possible (and of course partial) solution.

The home insurance crisis – losing (affordable) coverage and doing without:

• “Nobody’s insurance rates are safe from climate change,” Dana Nuccitelli, Yale Climate Connections.
• “Insurers are deserting homeowners as climate shocks worsen,” Christopher Flavelle, New York Times. Excellent overview with an example from Silver City, New Mexico. “Without insurance, it’s impossible to get a mortgage; without a mortgage, most Americans can’t buy a home.” Related: “Climate change drives up insurance costs—and missed mortgage payments,” Mario Alejandro Ariza, Floodlight.
• “As insurers around the U.S. bleed cash from climate shocks, homeowners lose,” Christopher Flavelle, New York Times. Another excellent overview focused on the center of the country. 
• The New York Times has really been following the insurance story. Here is a slightly tangential but interesting piece from the business section of the paper: “Home insurance is clobbering consumers. Yet it’s barely counted in inflation,” Jeanna Smialek. 
• “How climate risks are driving up insurance premiums around the U.S.—visualized,” Oliver Milman, The Guardian. The links between climate-disaster risk and rising premiums.

Farmers and their crops are having trouble, too, as a result of climate change:

Even automobile insurance is feeling the climate bite:

The Hurricane Helene situation, with few victims covered by flood insurance:

The insurance mess in California – a story in progress: 

• First, an overview of the state’s issues from May, 2024: “Home insurance was once a ‘must.’ Now more homeowners are going without,” Patrick Cooley, Washington Post.
• From the end of December 2024 and start of January, 2025, about the insurance changes underfoot in California: “State takes final step to fix California’s troubled home insurance market,” Laurence Darmiento, LA Times.
• And once the January LA fires erupted, too soon for any of the changes to have taken effect, both from the New York Times: “Wildfires intensify pivotal moment for insurance industry” (Ronda Kaysen) and “California wildfires threaten insurers already teetering from climate shocks” (Christopher Flavelle).
• About a week into the fires: “L.A. wildfires worsen California insurance crisis,” Katie Jensen, National Mortgage Professional. “Home insurers nowhere to be found during ‘one of the worst wildfire incidents on record.’”

Parametric insurance is one new(ish) way to deal with some of these problems. Aimed largely at climate-change disaster coverage, it is not yet much used by individuals and may not provide full compensation for losses, but it has potential.

• “Insuring for climate change: the role of parametric insurance,” K. James Sullivan, Practical Guidance Journal, LexisNexis. A clear overview of what this is, how it works, and some examples from around the world.
• Another good introduction – and a rare one that is not in an industry publication: “The company working to make flood insurance climate-proof,” Kiley Price, Time.
• Being considered by California in 2024: “Parametric insurance: what it is & the role it could play,” PDF from the California Legislature’s Assembly Committee on Insurance.
• More examples: in Africa, in Canada, and for farmers in developing countries.