Is Earth becoming uninsurable?

Exploring the record number of billion dollar disasters in 2023

Author profile picture

Susan Meyer

Senior Editorial Manager

  • Licensed Insurance Agent — Property and Casualty

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebr…

Author profile picture

Ross Martin

Insurance Writer

  • 4+ years in the Insurance Industry

Ross joined The Zebra as a writer and researcher in 2019. He specializes in writing insurance content to help shoppers make informed decisions.

Ross h…

A lot has happened in 2023 and not all of it has been good. The United States has been hit by a record number of billion-dollar disasters — and it’s not over yet. 

According to the NOAA, the US has sustained 24 climate disasters where the damages exceeded $1 billion in the first 10 months of this year[1].

In this article, we’ll delve into what those are, how 2023 compares to other years, and what that means for the insurance industry.

A brief look back at 2023

Although the year’s not over yet, it’s worth looking back at what’s already happened in the past 10 months. 

Of the 24 confirmed $1 billion climate events, one was a drought, two were floods, one was a tropical cyclone, one was a wildfire, one was a winter storm and the remaining 18 were severe storms. Overall, these events led to the deaths of 373 people and caused billions in damages.

You likely remember some of these events which include Hurricane Idalia which made landfall in Florida in August and the Hawaii fires of Maui which caused $5.5 billion dollars in damages and significant loss of life.

However, others might not have captured national attention, such as a multi-day outbreak of hail and severe weather across Colorado and surrounding states in June. This event alone caused $3.5 billion in damages.

How 2023 compares to other years

So “record-breaking number of billion dollar disasters” sounds bad, right? But how bad? Let’s look at some of the previous years. The number of billion-dollar weather and climate events has been going up in the last few decades. 

In the 1980s, it averaged 3 such events a year, in the 1990s 8.5 per year, the 2000s 6.7 per year and the 2010s 13 per year. The last five years have seen an average of 18 events per year. And now, with 2023 (so far) we have a whopping 24.

Why are we seeing more frequent costly weather events?

There are two main reasons for this increase in billion-dollar weather events. The first, of course, is climate change. The overall warming of the Earth does lead to increases in extreme weather, including hurricanes and fires. Earthquakes are the outlier that are not influenced by climate change, but notably no earthquakes contributed to the billion-dollar disasters this year. 

While global climate change is a major cause of the increase in large storms and fires, it’s likely not the only reason for more expensive disasters. The amount in damages is not adjusted for inflation, and the costs for repairs and rebuilding have definitely increased. 

For example, consider just the cost of replacing the roof in the event of a hurricane or hail storm. According to one source, the average cost of roof replacement for an average-sized home in 2023 is $11,500[2]. However, in 1990, the average cost of a roof replacement was only $3,500[3]. As you can imagine, when you’re talking about hundreds or thousands of damaged buildings, these differences can rack up quickly.

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[4]

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.