Climate and insurance in Louisiana

Climate and insurance are a Louisiana problem as insurance companies went broke.

Like a lot of people in Louisiana, the company that provided my homeowners insurance went bankrupt this year. Finding a new insurance company was stressful, though a kind and capable insurance agent made the process a little easier. I eventually obtained coverage through Louisiana Citizens, our state-run insurer of last resort. My annual premium increased by nearly $2,000, and is now 50% higher than my previous premium. As a coastal scientist, the event was a wake-up call to what insurance, a seemingly boring part of homeownership, reveals about our state’s future.

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We have not 1 but 2 insurance problems.

In Louisiana, we are dealing with at least two different but related insurance crises. Private companies that provide homeowners insurance, which generally covers wind and hail damage, are going bankrupt. Flood insurance rates, controlled by the federal government, are rising too. While these crises have some differences, they also have a common thread: Climate change is making Louisiana a riskier place to live. Nationwide, the number of billion-dollar, weather-related disasters continues to rise. Since 1980, these disasters have caused nearly $2.3 trillion in (inflation-adjusted) damage. Louisiana has experienced between $200 and $300 billion in damage — roughly 10% of the nation’s total. Texas and Florida have had similar costs from extreme weather, revealing how risky the Gulf Coast can be. (Hurricane Ian’s impacts have not yet been included in this dataset.) While the Gulf is no stranger to hurricanes, the recent years have been different. Since 2017, we have seen multiple major hurricanes strike the Gulf Coast, including Harvey (2017, Texas), Michael (2018, Florida), Laura (2020, Louisiana), Ida (2021, Louisiana) and Ian (2022, Florida). Add to this list intense rainfall events, like the 2016 Baton Rouge flood, and smaller but still powerful storms like hurricanes Sally and Zeta, and the entire region looks particularly risky.

Climate change is here but still, with the levee system, we can have engineering failures.

True, climate change is not responsible for all weather-related damage. Our worst disaster, Hurricane Katrina, was an engineering failure that was coupled with widespread government failures. Our coast has also lost nearly 2,000 square miles of land, much of it due to canal construction, levees along the Mississippi River and subsidence. And yet stronger storms, fueled by climate change, can add stresses to existing conditions, raising risks for many. Theoretically, private insurance companies could raise premiums to match risk, which would help them remain solvent. That is what FEMA is trying to do with “Risk Rating 2.0,” its new methodology for assigning flood insurance rates. While we do not know exactly how much rates will rise (FEMA’s data transparency has been less than stellar), the increases do not bode well for many homeowners. According to this paper, properties in Louisiana will see premiums increase by an average of 122%. In some flood-prone areas, including Houma, Covington, and parts of New Orleans, annual premiums could eventually increase by several thousand dollars.

Insurance is complex, climate change is not.

While insurance is complex, the link to climate change is straightforward. Warmer oceans provide more energy for hurricanes, increasing their size and windspeeds. A warmer atmosphere can hold more water vapor, making rainstorms more intense. These changes make storms more severe, adding costs to public and private insurers. Barring outside subsidies, increased costs will be paid for through premium increases — or payout decreases. Add together the costs of rising premiums for home and flood insurance, and affordability quickly becomes a critical issue for many homeowners. This raises the question: If people cannot live in their home, either because it is unaffordable or damaged, will they move out of state? What happens to Louisiana after that? Every year, the federal government hands out hundreds of billions of dollars based on census counts. Those dollars are in jeopardy if Louisianans move to Atlanta or Dallas. What will happen to our voices on Capitol Hill, where representation in the House is apportioned based on population? In 1990, Louisiana had eight representatives, now there are six. What happens to businesses if their customers move out of state?

We do need to look and discuss these issues.

We need do to more to address these converging issues of rising insurance risks, outward migration and climate change. The efforts need to be inclusive of Louisiana’s diverse population and work across multiple levels of government, the private sector and community groups. Louisiana has some advantages here; we are good at developing complex environmental plans. Louisiana’s Coastal Master Plan is recognized as one of the most advanced in the country. We are now the only Gulf state with a climate action plan. This makes one wonder, could Louisiana develop a climate insurance plan too? The job facing us will certainly be difficult, but the rewards of being able to call Louisiana home make it worthwhile.

I expected an increase in my insurance but got a drop. Had my increase been $2000 what would I have done knowing it would go up more next year.