What does this mean for insurance?
Because of these increasingly common, incredibly expensive disasters, what does that mean for insurance? Insurance companies are finding it increasingly difficult to cover the damages stemming from weather disasters. We’re already seeing this happen as big-name insurance companies are choosing not to write new policies in states frequently hit by disasters including California, Florida and Louisiana.
Due to the rising costs to repair and replace damaged property and increased claims due to frequent disasters, it’s not tenable for insurance companies to operate in certain places. Historically, insurance companies can help lower their risks through something called reinsurance (essentially insurance for insurance companies); however, reinsurance companies are also feeling the hits and have to continually raise prices.
If insurance companies raise their prices to cover their increasing losses, it will eventually be too expensive for the average person to insure their home. Because insurance is a state-regulated industry, this is creating a problem not only for insurance companies but also policymakers.
We don’t have the answers yet, but these are solutions we have to find as the Earth is rapidly changing, and this looks like a problem that will continue to worsen in future years.