Insurance premiums for US homeowners are projected to rise by an average of 29.4% over the next 30 years due to climate risks, with some areas facing much steeper increases, AM Best reported, citing First Street Foundation data.
According to the 12th National Risk Assessment Property Prices in Peril by the foundation, three of Florida’s largest metro areas could see premiums increase by 213% or more. The majority of the increase is attributed to correcting the underpricing of insurance premiums, while the remaining 11% could result from growing climate risks.
The report also noted that property insurance costs have already begun to increase rapidly. Jeremy Porter, head of climate implications at First Street Foundation, noted that homeowners and specialized insurance premiums have risen 66% on average since 2017, outpacing home price appreciation.
Homeowners insurance premiums, which historically accounted for 7% to 8% of mortgage costs, climbed to 23% last year. Porter indicated that this percentage is likely to continue rising until rates reflect actuarial soundness.
“Insurance costs are increasing as a response to climate risk exposure,” Porter said.
The report also suggested that the rising costs and reduced availability of insurance may influence where people choose to live in the future. First Street estimates that increasing climate risks could reduce national residential real property values by $1.47 trillion by 2055, or 2.9% of the current value.
“The insurance-driven transformation of property economics is particularly significant,” according to First Street.
The greatest projected increase in homeowners insurance costs over the next 30 years is expected in the Miami area, where premiums could rise by 322%. Other areas with significant increases include Jacksonville, with a projected 226% increase and Tampa, with an expected 213% increase. Variations in insurance premiums within these regions will also depend on individual property risks, First Street said.
