Florida's Biggest Insurer Says It Needs to Increase Rates by 93 Percent
newsweek.com
newsweek.com
I'm not gloating though. I think what's happening to Florida right now (sea level changes, hurricanes, uninsurability) is what will happen to for example Amsterdam in a few decades. Flood risks are mostly uninsured in the Netherlands, while hurricane risks seem insured in Florida. I don't see house prices correcting for flood risks in Amsterdam, even though the risk of going under seems well inside the time boundary of current sales / mortgages. People are myopic and seem to expect states to handle all adverse effects of risk, both in the Florida case ("Florida residents already pay too much for insurance"), and in the Dutch case (no insurance, but we'll get bailed-out, right?).
[1] https://en.wikipedia.org/wiki/Citizens_Property_Insurance_Co...
Andrew’s insured losses in Florida were $15bn ($34bn in 2024 dollars); today “3.7 million residences would be in the path of an Andrew-like storm…with a total replacement value of more than $900 billion” and “insured losses [over] $72 billion” [1].
Florida’s budget, for context, is about $120bn [2].
[1] https://www.insurancejournal.com/news/southeast/2022/08/24/6...
[2] https://www.flgov.com/wp-content/uploads/2024/06/Budget.pdf
I suppose the bright side of this is that the general fund is funded by federal tax due of the top 40% of US taxpayers, so there is a very coarse progressive taxation mechanism to this climate cost liability. Still not great!
Isn’t that in the gap between $900 and 77bn?
It doesn’t. It means when their town gets swept out to sea, they’ll be on the hook for 90% of the cost of rebuilding. That will presumably reduce their numbers.
If Florida was a nation, "nationalized" might be a better term. And since Florida is too big to fail, the federal government would certainly come to their rescue after the inevitable catastrophe. So this really is back-door nationalization, a sneaky way to force taxpayers in New York, New Jersey, Illinois. Virginia and California to assume the risk of Florida's policies of climate-change denial.
It's a cynical game of chicken with climate change. By propping up its insurance market with artificially low rates, the state kicks the can down the road in the same way that big banks did before the 2008 collapse. The state and their propertied class profit today, delaying the inevitable reckoning with reality, and transferring the risk of their bad decisions to taxpayers.
It's a bail-out. But instead of blue-state taxpayers injecting cash into Florida today, they're unwittingly and involuntarily underwriting the risk that the state of Florida and wealthy Palm Beach property owners have assumed on their behalf.
This is far into untested territory. States have no clear route to bankruptcy. That’s far from being “too big to fail.”
Depending on who’s in power in D.C., a federal rescue of Florida on the back of an insurance failure could come with a significant cost.
What Citizens did (and maybe still does; it's been about 20-some years), is "tax" the private insurance companies to help pay their deficit bill. Of course, the private insurance companies are legally compelled to pay, but they pass it onto those of us who were insured privately.
So, FL government may have paid as well--I don't know. All I know is we (the privately insured citizens certainly did).
The main issue at this point is wealthy people/PE buying up all the homes self insuring.
Interesting thesis. So premiums will keep going up, but insurers will be allowed to cut coverage to maintain margins. This would work until the next disaster hit, which could well be a few years away.
Question is why lenders would go along with the charade.
You don't have to believe in climate change [1] [2] [3], your insurer and the financial system will for you, and price accordingly. The cost and frequency of loss is rising, these are facts.
[1] https://www.bbc.com/future/article/20240712-modern-hurricane... ("BBC: Modern hurricanes are rewriting the rules of extreme storms")
[2] https://www.scientificamerican.com/article/thunderstorms-hav... | https://archive.today/4UBn4 ("Scientific American: Thunderstorms Have Caused $45 Billion in Damages in the U.S. in Just Six Months")
[3] https://www.bloomberg.com/news/articles/2024-04-18/climate-c... | https://archive.today/0KOEz ("Bloomberg: Climate Change’s ‘Physical Risks’ Are Catching Up With Banks | The financial industry is waking up to the potential losses from extreme events and long-term changes in weather patterns.")
If insurance pricing declined after legislative fixes, I believe that would be evidence these reforms were contributing factors. The fact that insurance premiums continue to rise (even at the state insurer of last resort) leads me to believe reforms are insufficient to contain insurance costs, and that climate change is the primary driver.