Property Insurance Is Rising Even in States With Low Risk of Natural Disasters

Insurance costs shot up 440 basis points since Q2 2018 in Florida.

Hurricanes, floods, fires, earthquakes, droughts, tornadoes. Natural disasters have become so common in the U.S. n recent years that they no longer evoke the same level of shock in the general public that they once did – unless you are directly affected.

The costs in lives, property damage, lost livelihoods, displacement and environmental harm are enormous. And insurance companies have been tracking these losses closely.

Between 2017 and 2021, the average annual losses in California due to wildfires totaled $117.4 billion, according to a study by the Gordon and Betty Moore Foundation. The fiscal loss to the state amounted to $5.03 billion, and the global climate impact totaled $1.16 billion.

By one estimate, Hurricane Ian, which struck Florida in September 2022 and led to 149 deaths, cost residents $112 billion. A year later, Hurricane Idalia ripped through the state, bringing additional costs estimated at $9 billion to $20 billion.

At times like this, the first thing property owners are likely to do is call their insurance agent. If they don’t already have adequate insurance, they are likely to buy it. Insurers in states liable to disasters have responded by raising rates.

A new analysis by CBRE has found that insurance costs shot up 440 basis points since Q2 2018 in Florida. In California, the leap was 370 basis points “Both states well exceed the national average of 240 basis points,” the report noted.

Risk levels for each state are estimated by FEMA. “Generally, insurance costs have spiked more sharply in states with elevated FEMA risk levels. However, Texas, Arizona and Nevada, each at the highest level of risk, have largely avoided outsized insurance increases,” the report found.

But it does not expect this good fortune to last much longer, especially in coastal markets like Houston, rather than in inland markets like Austin and Dallas.

The report shows that even states with moderate FEMA risk ratings of 13-17 have seen the insurance share of operating expenses rise 166-280 basis points. In states with higher risk ratings of 17-26 the increase has been 281-435 basis points. States with the lowest FEMA risk ratings have not escaped; insurers there have raised rates as much as 110 basis points.