A new storm is emerging to combat climate change: homeowner’s insurance

I heard that my insurance company was filing too late on Friday to do anything about it, so I called the insurance agent first thing the following Monday morning. His response, delivered politely and graciously was an effective, “stay in line.” They are dealing with the collapse of two other companies that declared bankruptcy, and their customers had to be bailed out before the end of the month. My company didn’t cancel the process until the middle of the following month, so I had a little time on my side.

I am not alone in this insurance problem; My insurance company was the seventh company to file for bankruptcy in Louisiana this year. Although insurance is a complex business, with different actors from ratepayers to local regulators and international insurance companies, one thing is clear in this sector: climate change.

The impact of climate change on Louisiana is something I know firsthand. I work at a marine laboratory on the coast, and for the past 15 years I have looked at the effects, and damage, of climate change. In 2020, Louisiana was in the “cone of uncertainty” — the area most likely to experience a hurricane — a record seven times. One of these storms, Hurricane Laura, was one of the two strongest to hit Louisiana in recorded history. The following year Hurricane Ida hit, equaling or exceeding the strength of Laura, causing widespread destruction across the central coast of the state and even in many inland areas.

Take this list in the context of hurricanes that hit nearby areas in recent years – such as Hurricane Harvey in Houston and Hurricane Michael in northwest Florida – and the northern Gulf seems like a dangerous bet for insurance companies. Even companies can raise premiums to match the risk, saying most people can’t afford these prices. Faced with huge losses, and unable to raise wages, companies declare bankruptcy. For example, in the case of my insurance company, they declared bankruptcy when Florida, another insurer, rejected their attempt to raise premiums by 85 percent.

Many people I know have also looked for new insurance, which they had to get from a state-run insurance company, albeit at a higher cost. I got new insurance through this plan – adding about $2,000 in premiums. Although I am being told that I will be reimbursed for six months of my old policy – about another $2,500, I do not know when the check will come. The government agency that oversees insurance companies that have gone backwards recently announced that they hope to sell $600 million in bonds to meet the demands of the failed companies. The costs of all this are complex, confusing, and it is not always known how the end will be achieved.

Ironically, the current insurance debacle is different from the well-known risks of government. In the years since Hurricane Katrina in 2005, federal, state and local governments have spent billions of dollars to reduce flood risks and rebuild the depleted coastline. Those efforts have been successful. In some cases, they have helped make flood insurance affordable, but they are not really affected by the current situation. That’s because flood risks are managed differently than other risks faced by homeowners. Flood insurance is regulated by the government, private companies are often excluded from the flood insurance market. Questions are also emerging about federalism the government’s new flood risk plan.

The losses that hit Louisiana’s private insurers came primarily from the hurricane, not its rising waters. It’s a reminder that the weather affects everything in the air and water around us – and that the entire climate is changing.

What worries me the most is that this issue could spread across the country. Although Louisiana’s weather hazards are on the extreme end of the spectrum, there are many places that are not too far off. Florida has similar problems, and California has problems related to fires. I’m worried that another hurricane zone in the Carolinas, mid-Atlantic or maybe New England won’t be too far away. All in all, it reminds me of what my friend, beach restoration expert John Ettinger says, “Lands will be underwater before they are underwater.” Here in Louisiana, water is rising physically and financially, and even if you don’t live here, you should watch where it goes.

Alexander S. Kolker, Ph.D. is an associate professor at the Louisiana Universities Marine Consortium. They study climate change, sea level rise, resilience and changes in coastal systems. His work is centered on the shorelines and wetlands of the Mississippi Delta, and he has worked in systems around the world, including the Florida Everglades, New York and North Africa. His work involves a combination of field studies, data analysis and theoretical work.