Insurance Rates Increasing on Coastal Properties

Climate change is proving to be extremely costly, both environmentally and financially. Disclosure 1 1 Yale Climate Connection, “How climate change is making hurricanes more dangerous,” accessed Dec. 16, 2020, https://yaleclimateconnections.org/2019/07/how-climate-change-is-making-hurricanes-more-dangerous/(opens in a new tab) Rising sea-levels and increased storm activity are directly affecting household insurance rates and overall coverage.

Homeowners living in communities continually devastated by hurricanes are experiencing increased premiums, deductibles, and underwriting guidelines due to escalated tropical storm activity exacerbated by rising ocean temps.

If the Atlantic hurricane season continues its increase in activity and severity, coastal homeowners can expect rates to continue to rise while coverage options decline.

Forecasters predicted that the 2020 Atlantic hurricane season would be “above normal” and, unfortunately, they were correct. With 30 named storms, 13 of which became hurricanes, 2020 was the most active hurricane season in recorded history, resulting in damages totaling about $40 billion. Disclosure 2 2 Center for Disaster Philanthropy, “2020 Hurricane Season,” accessed Dec. 16, 2020, https://disasterphilanthropy.org/disaster/2020-atlantic-hurricane-season/(opens in a new tab) 

While 2020 broke hurricane records, it was not as financially devastating as the 2017 or 2005 Atlantic hurricane seasons. In 2017, hurricanes accumulated over $306 billion in damages, breaking the 2005 record of $214.8 billion. Disclosure 3 3 Office for Coastal Management, “Fast Facts: Hurricane Costs,” accessed Dec. 16, 2020, https://www.coast.noaa.gov/states/fast-facts/hurricane-costs.html(opens in a new tab) 2017’s costly hurricane season is continuing to affect Americans with coastline properties and even those who live dozens of miles inland.

Most hurricane and flooding damages in the U.S. average an annual economic loss of about $54 billion. Disclosure 4 4 The Triple-I Blog, “Mangroves and Reefs: Insurance Can Help Protect Our Protectors,” accessed Dec. 16, 2020, https://www.iii.org/insuranceindustryblog/mangroves-and-reefs-insurance-can-help-protect-our-protectors/(opens in a new tab)  This increase in loss over the years is partly due to increased coastal development. As the number and size of homes being built along the coast grows, there’s a correlating increase of insured valuables and cars within these coastal communities—all of which result in larger losses when disaster strikes.

With carriers having to settle more and more claims with higher and higher payouts to households in hurricane-prone communities, they are increasing rates to cover costs.

Over the last several years, numerous carriers have actually stopped selling policies in high-risk ZIP codes to avoid large payouts altogether. This leaves homeowners with fewer options and the remaining carriers struggling to determine appropriate pricing levels to cover their risk exposure. Most carriers still providing coverage in high-risk areas are instituting stricter underwriting guidelines which can make it difficult for some homeowners to qualify for a renewal offer. For example, some carriers are establishing or raising minimum insured values, while others are requiring updates to wiring, heating, and plumbing systems. Disclosure 5 5 CRC Group, “Storms Ahead – Rising Wind Rates Hit Coastal Homeowners,” accessed Dec. 16, 2020, https://www.crcgroup.com/Tools-Intel/post/storms-ahead-rising-wind-rates-hit-coastal-homeowners?portalid=34?portalid=34?portalid=34(opens in a new tab)

Traditional homeowners insurance excludes damages caused by hurricanes, which means coastal property owners most likely need to purchase additional policies for hurricane, wind, and flood events. It is not uncommon to have 3 or 4 insurance policies to provide an appropriate level of protection for a coastal home.

With fewer options, increased rates, and necessary additional coverage, coastal property owners are struggling to find insurance policies that fit their needs. Our experienced brokers at McGriff can help you successfully navigate this market and secure coverage that protects your coastal property. If you aren’t currently working with one of our specialists, please click below to read more about our Private Client services and find a Family Risk Manager near you.