Category: Housing, Community

The New York Times

Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse.

Christopher Flavelle – May 31, 2023

The climate crisis is becoming a financial crisis.

This month, the largest homeowner insurance company in California, State Farm, announced that it would stop selling coverage to homeowners. That’s not just in wildfire zones, but everywhere in the state.

Insurance companies, tired of losing money, are raising rates, restricting coverage or pulling out of some areas altogether — making it more expensive for people to live in their homes.

“Risk has a price,” said Roy Wright, the former official in charge of insurance at the Federal Emergency Management Agency, and now head of the Insurance Institute for Business and Home Safety, a research group. “We’re just now seeing it.”

In parts of eastern Kentucky ravaged by storms last summer, the price of flood insurance is set to quadruple. In Louisiana, the top insurance official says the market is in crisis, and is offering millions of dollars in subsidies to try to draw insurers to the state.

And in much of Florida, homeowners are increasingly struggling to buy storm coverage. Most big insurers have pulled out of the state already, sending homeowners to smaller private companies that are straining to stay in business — a possible glimpse into California’s future if more big insurers leave.

Growing ‘catastrophe exposure’

State Farm, which insures more homeowners in California than any other company, said it would stop accepting applications for most types of new insurance policies in the state because of “rapidly growing catastrophe exposure.”

The company said that while it recognized the work of California officials to reduce losses from wildfires, it had to stop writing new policies “to improve the company’s financial strength.” A State Farm spokesperson did not respond to a request for comment.

Insurance rates in California jumped after wildfires became more devastating than anyone had anticipated. A series of fires that broke out in 2017, many ignited by sparks from failing utility equipment, exploded in size with the effects of climate change. Some homeowners lost their insurance entirely because insurers refused to cover homes in vulnerable areas.

Michael Soller, a spokesperson for the California Department of Insurance, said the agency was working to address the underlying factors that have caused disruption in the insurance industry across the country and around the world, including the biggest one: climate change.

He highlighted the department’s Safer From Wildfires initiative, a fire resilience program, and noted that state lawmakers are also working to control development in the areas at highest risk of burning.

But Tom Corringham, a research economist with the Scripps Institution of Oceanography at the University of California San Diego who has studied the costs of natural disasters, said that allowing people to live in homes that are becoming uninsurable, or prohibitively expensive to insure, was unsustainable.

He said that policymakers must seriously consider buying properties that are at greatest risk, or otherwise moving residents out of the most dangerous communities.

“If we let the market sort it out, we have insurers refusing to write new policies in certain areas,” Corringham said. “We’re not sure how that’s in anyone’s best interest other than insurers.”

A broken model

California’s woes resemble a slow-motion version of what Florida experienced after Hurricane Andrew devastated Miami in 1992. The losses bankrupted some insurers and caused most national carriers to pull out of the state.

In response, Florida established a complicated system: a market based on small insurance companies, backed up by Citizens Property Insurance Corp., a state-mandated company that would provide windstorm coverage for homeowners who couldn’t find private insurance.

For a while, it mostly worked. Then came Hurricane Irma.

The 2017 hurricane, which made landfall in the Florida Keys as a Category 4 storm before moving up the coast, didn’t cause a particularly great amount of damage. But it was the first in a series of storms, culminating in Hurricane Ian last October, that broke the model insurers had relied on: One bad year of claims, followed by a few quiet years to build back their reserves.

Since Irma, almost every year has been bad.

Private insurers began to struggle to pay their claims; some went out of business. Those that survived increased their rates significantly.

More people have left the private market for Citizens, which recently became the state’s largest insurance provider, according to Michael Peltier, a spokesperson. But Citizens won’t cover homes with a replacement cost of more than $700,000, or $1 million in Miami-Dade County and the Florida Keys.

That leaves those homeowners with no choice but private coverage — and in parts of the state, that coverage is getting harder to find, Peltier said.

‘Just not enough wealth’

Florida, despite its challenges, has an important advantage: A steady of influx of residents who remain, for now, willing and able to pay the rising cost of living there. In Louisiana, the rising cost of insurance has become, for some communities, a threat to their existence.

Like Florida after Andrew, Louisiana’s insurance market started to buckle after insurers began leaving following Hurricane Katrina in 2005. Then, starting with Hurricane Laura in 2020, a series of storms pummeled the state. Nine insurance companies failed; people began rushing into the state’s own version of Florida’s Citizens plan.

The state’s insurance market “is in crisis,” Louisiana’s insurance commissioner, James J. Donelon, said in an interview.

In December, Louisiana had to increase premiums for coverage provided by its Citizens plan by 63%, to an average of $4,700 a year. In March, it borrowed $500 million from the bond market to pay the claims of homeowners who had been abandoned when their private insurers failed, Donelon said. The state recently agreed to new subsidies for private insurers, essentially paying them to do business in the state.

Donelon said he hoped that the subsidies would stabilize the market. But Jesse Keenan, a professor at Tulane University in New Orleans and an expert in climate adaptation and finance, said the state’s insurance market would be hard to turn around. The high cost of insurance has begun to affect home prices, he said.

In the past, it would have been possible for some communities — those where homes are passed down from generation to generation, with no mortgages required and no banks demanding insurance — to go without insurance altogether. But as climate change makes storms more intense, that’s no longer an option.

“There’s just not enough wealth in those low-income communities to continue to rebuild, storm after storm,” Keenan said.

A shift to risk-based pricing

Even as homeowners in coastal states face rising costs for wind coverage, they’re being squeezed from yet another direction: Flood insurance.

In 1968, Congress created the National Flood Insurance Program, which offered taxpayer-backed coverage to homeowners. As with wildfires in California and hurricanes in Florida, the flood program arose from what economists call a market failure: Private insurers wouldn’t provide coverage for flooding, leaving homeowners with no options.

The program achieved its main goal, of making flood insurance widely available at a price that homeowners could afford. But as storms became more severe, the program faced growing losses.

In 2021, FEMA, which runs the program, began setting rates equal to the actual flood risk facing homeowners — an effort to better communicate the true danger facing different properties, and also to stanch the losses for the government.

Those increases, which are being phased in over years, in some cases amount to enormous jumps in price. The current cost of flood insurance for single-family homes nationwide is $888 a year, according to FEMA. Under the new, risk-based pricing, that average cost would be $1,808.

And by the time current policyholders actually have to pay premiums that reflect that full risk, the impacts of climate change could make them much higher.

“Properties located in high-risk areas should plan and expect to pay for that risk,” David Maurstad, head of the flood insurance program, said in a statement.

The best way for policymakers to help keep insurance affordable is to reduce the risk people face, said Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund. For example, officials could impose tougher building standards in vulnerable areas.

Government-mandated programs, like the flood insurance plan, or Citizens in Florida and Louisiana, were meant to be a backstop to the private market. But as climate shocks get worse, she said, “we’re now at the point where that’s starting to crack.”

Associated Press

Struggles continue for thousands in Florida 8 months after Hurricane Ian as new storm season looms

Curt Anderson – May 28, 2023

FORT MYERS BEACH, Fla. (AP) — Eight months ago, chef Michael Cellura had a restaurant job and had just moved into a fancy new camper home on Fort Myers Beach. Now, after Hurricane Ian swept all that away, he lives in his older Infiniti sedan with a 15-year-old long-haired chihuahua named Ginger.

Like hundreds of others, Cellura was left homeless after the Category 5 hurricane blasted the barrier island last September with ferocious winds and storm surge as high as 15 feet (4 meters). Like many, he’s struggled to navigate insurance payouts, understand federal and state assistance bureaucracy and simply find a place to shower.

“There’s a lot of us like me that are displaced. Nowhere to go,” Cellura, 58, said during a recent interview next to his car, sitting in a commercial parking lot along with other storm survivors housed in recreational vehicles, a converted school bus, even a shipping container. “There’s a lot of homeless out here, a lot of people living in tents, a lot of people struggling.”

Recovery is far from complete in hard-hit Fort Myers Beach, Sanibel and Pine Island, with this year’s Atlantic hurricane season officially beginning June 1. The National Oceanic and Atmospheric Administration is forecasting a roughly average tropical storm season forecast of 12 to 17 named storms, five to nine becoming hurricanes and one to four powering into major hurricanes with winds greater than 110 mph (177 kph).

Another weather pattern that can suppress Atlantic storms is the El Nino warming expected this year in the Pacific Ocean, experts say. Yet the increasingly warmer water in the Atlantic basin fueled by climate change could offset the El Nino effect, scientists say.

In southwest Florida, piles of debris are everywhere. Demolition and construction work is ongoing across the region. Trucks filled with sand rumble to renourish the eroded beaches. Blank concrete slabs reveal where buildings, many of them once charming, decades-old structures that gave the towns their relaxed beach vibe, were washed away or torn down.

Some people, like Fort Myers Beach resident Jacquelyn Velazquez, are living in campers or tents on their property while they await sluggish insurance checks or building permits to restore their lives.

“It’s, you know, it’s in the snap of the finger. Your life is never going to be the same,” she said next to her camper, provided under a state program. “It’s not the things that you lose. It’s just trying to get back to some normalcy.”

Ian claimed more than 156 lives in the U.S., the vast majority in Florida, according to a comprehensive NOAA report on the hurricane. In hard-hit Lee County — location of Fort Myers Beach and the other seaside towns — 36 people died from drowning in storm surge and more than 52,000 structures suffered damage, including more than 19,000 destroyed or severely damaged, a NOAA report found.

Even with state and federal help, the scale of the disaster has overwhelmed these small towns that were not prepared to deal with so many problems at once, said Chris Holley, former interim Fort Myers Beach town manager.

“Probably the biggest challenge is the craziness of the debris removal process. We’ll be at it for another six months,” Holley said. “Permitting is a huge, huge problem for a small town. The staff just couldn’t handle it.”

Then there’s battles with insurance companies and navigating how to obtain state and federal aid, which is running into the billions of dollars. Robert Burton and his partner Cindy Lewis, both 71 and from Ohio, whose mobile home was totaled by storm surge, spent months living with friends and family until finally a small apartment was provided through the Federal Emergency Management Agency. They can stay there until March 2024 while they look for a new home.

Their mobile home park next to the causeway to Sanibel is a ghost town, filled with flooded-out homes soon to be demolished, many of them with ruined furniture inside, clothes still in closets, art still on the walls. Most homes had at least three feet of water inside.

“No one has a home. That park will not be reopened as a residential community,” Lewis said. “So everybody lost.”

The state Office of Insurance Regulation estimated the total insured loss from Ian in Florida was almost $14 billion, with more than 143,000 claims still open without payment or claims paid but not fully settled as of March 9.

With so many people in limbo, places like the heavily damaged Beach Baptist Church in Fort Myers Beach provide a lifeline, with a food pantry, a hot lunch stand, showers and even laundry facilities for anyone to use. Pastor Shawn Critser said about 1,200 families per month are being served at the church through donated goods.

“We’re not emergency feeding now. We’re in disaster recovery mode,” Critser said. “We want to see this continue. We want to have a constant presence.”

In nearby Sanibel, the lingering damage is not quite as widespread although many businesses remain shuttered as they are repaired and storm debris is everywhere. Seven local retail stores have moved into a shopping center in mainland Fort Myers, hoping to continue to operate while awaiting insurance payouts, construction permits, or both before returning to the island.

They call themselves the “Sanibel Seven,” said Rebecca Binkowski, owner of MacIntosh Books and Paper that has been a Sanibel fixture since 1960. She said her store had no flood insurance and lost about $100,000 worth of books and furnishings in the storm.

“The fact of the matter is, we can get our businesses back up and running but without hotels to put people in, without our community moving back, it’s going to be hard to do business,” she said. “You hope this is still a strong community.”

Yet, the sense among many survivors is one of hope for the future, even if it looks very different.

Cellura, the chef living in his car, has a new job at another location of the Nauti Parrot restaurant on the mainland. Insurance only paid off the outstanding loan amount on his destroyed camper and he didn’t qualify for FEMA aid, leaving him with virtually nothing to start over and apartment rents rising fast.

But, after 22 years on the island, he’s not giving up.

“I believe that things will work out. I’m strong. I’m a survivor,” he said. “Every day I wake up, it’s another day to just continue on and try to make things better.”

AP visual journalist Laura Bargfeld and photographer Rebecca Blackwell contributed to this story.