As wildfires raged through California and hurricanes drowned parts of Florida, the high-powered climate events spooked more than just the residents. In the last year, multiple homeowners’ insurance companies stopped writing policies in some states that face high risks of extreme weather events fueled by climate change.
New England has experienced its own set of climate issues this summer, between torrential flooding and relentless heat. Though the region may not be facing the same deluge of climate issues that other states are, climate change has already begun to challenge our idea of normal.
But a dramatic exit of insurance companies is unlikely in New England, experts say, though homeowners’ insurance companies are surely taking notice of climate change as they issue new policies, which could affect premiums.
“Massachusetts, generally, is doing better than many states in terms of accessibility to insurance,” said Samantha Montano, assistant professor of emergency management at Massachusetts Maritime Academy. “However, that does not mean that we shouldn’t be looking ahead to see what changes should be made now to set ourselves up better to deal with climate impacts in the future.”
Homeowners’ insurance offers protection for your home in case of a disaster, though which disasters it covers can vary depending on your policy. Though state law doesn’t mandate you insure your home, your lender may require it to protect their financial stakes in your property. How much your premium is depends on a variety of factors, including the age and condition of your home, the cost to rebuild it, and the location of the home.
But one key factor is on the rise: risk. Experts agree that climate change will undoubtedly add more risk as climate disasters become more unpredictable in their scale, locality, and frequency.
This summer brought flooding, extreme heat, and Hurricane Lee to areas in New England; in the rest of the United States, a tropical storm hit Southern California for the first time in 84 years and an apocalyptic wildfire took nearly 100 lives in Maui.
As risk goes up, costs will follow, and insurance companies will individually decide how much risk they’re willing to take on. Some companies may hike up premiums, while others may refuse to issue new policies to riskier homes, according to Trevor Burgess, CEO of the private flood insurance company Neptune Insurance.
Burgess said that high risk has pushed the company to refuse insurance to just 5 percent of homes — but those are the critical ones.
“We’re telling you the real risk associated with your property,” Burgess said. “So if we’re telling you the price of flood insurance for your home is $80,000, you should probably move.”
Increased climate risk has also led to higher reinsurance rates globally; these are the insurers who insure your insurance company. Reinsurers have been driving up their rates so they can still turn a profit in the face of steeper losses. Property catastrophe reinsurance rates for the United States rose by as much as 50 percent at this year’s July 1 renewal date, according to a report from reinsurance broker Gallagher Re.
Risk for flooding, which is one of the biggest climate threats facing New Englanders, can range due to a variety of factors, like age of the property, elevation, and location. With their susceptibility to hurricanes, homeowners in coastal areas and Cape Cod could see more pricier insurance.
But insurers can also adapt. The Massachusetts FAIR Plan, which is a last resort for those unable to secure insurance in the voluntary market, has decreased policies on Cape Cod over the last decade, according to Michael Reilly, vice president and chief claims officer at Massachusetts Property Insurance. That means the number of properties on Cape Cod able to secure insurance has increased as primary insurances trickled back into the area after refining their risk assessments, Reilly said.
The most common disaster that New Englanders need to worry about is flooding. But contrary to popular belief, flooding is not covered by homeowners’ insurance and requires its own policy.
Many who have flood insurance are insured through the National Flood Insurance Program, an affordable coverage option that the Federal Emergency Management Agency offers, though that coverage often protects less than private flood insurance does. The market for private flood insurance is quite small as well, leaving homeowners with few options.
One of the largest issues, when it comes to climate preparedness, is how few homeowners are insured, said Montano.
“In the past several years, we’ve seen the number of policies across the country actually decrease, when we should see them rapidly increasing,” Montano said.
In 2023, Massachusetts had only 55,212 NFIP policies, meaning less than 2 percent of the state was insured with federal flood insurance. That’s down from a little over 57,000 policies in October 2012, according to NFIP data. Elsewhere in New England this year, nearly 4 percent of Rhode Island is insured under the NFIP, nearly 3 percent of New Hampshire, over 2 percent of Connecticut, just over 1 percent of Maine, and under 1 percent of Vermont.
FEMA maps highlight which areas are floodplains, and homeowners in those areas are required to have flood insurance. But those maps have long been outdated and underestimate how many areas are prone to flooding. And although insurance companies have their own experts to calculate flood risk, FEMA maps can lull homeowners into a false sense of security. Areas with less frequent natural disasters also tend to see less disaster insurance coverage.
“Those maps don’t really capture forecasted climate effects,” said Madison Condon, associate law professor at Boston University. “So there’s a lot of people who probably should have flood insurance but don’t.”
In some areas like Florida, insurance companies also have a history of delaying or slashing payouts, further eroding the trust in insurance companies.
Massachusetts’ Division of Insurance spokesperson Katrina Gaddis said the DOI is working to raise residents’ awareness of their need for coverage.
“DOI is committed to maintaining a stable and competitive home insurance market in Massachusetts,” Gaddis wrote in a statement to the Globe. “As climate risks grow, DOI, along with other agencies in the administration, continue to make climate resilience a priority for the protection of Massachusetts residents.”
Flooding may be the most pressing issue for homeowners, but as the climate crisis progresses, other disasters in New England could grow more unpredictable and severe. Hurricanes could move northward and grow stronger as the atmosphere warms, Condon said. And dry, hot summers can lead to an elevated wildfire risk in the region, according to reports from the National Interagency Fire Center. In these cases, it’s important to be familiar with the type of damage your homeowners’ insurance covers and the fine print involved.
Insurance is only a risk-transfer mechanism, not a risk-mitigation mechanism, experts say. Ultimately, it’s up to insurers to decide how much risk they’re willing to take on, and New England continues to be a good place to do business. But as risk increases, it becomes crucial for homeowners to make sure they have a safety net in place to protect them from increasingly frequent climate disasters.