Climate Change and Its Impact on Insurance Coverage and Premiums

Climate change is reshaping the insurance industry in profound ways. With natural disaster frequency and severity increasing in recent years, insurers are facing unprecedented challenges in managing risks and maintaining profitability. As the industry adapts to these new realities, both insurers and policyholders must navigate a complex and evolving environment.

What You Need to Know

Consider the following aspects of the evolving relationship between climate change and insurance coverage.

• More claims—Firstly, the rise in extreme weather events such as hurricanes, wildfires and floods is leading to higher claims. These events devastate communities and strain insurance companies’ financial resources, pushing them to reassess their risk models and coverage policies.

• Fewer options—Secondly, the concept of “insurance deserts” is becoming more prevalent. In regions particularly vulnerable to natural disasters, insurers may withdraw coverage altogether, leaving homeowners and businesses with few options. This is already happening in parts of Florida, where repeated hurricanes have made it increasingly difficult for residents to obtain affordable insurance.

• Higher prices—Moreover, premiums are on the rise. As insurers grapple with the growing costs associated with climate-related claims, they are passing these costs onto policyholders. This means higher premiums, making it more expensive for individuals and businesses to cover their assets. For example, in the aftermath of Hurricane Helene in 2024, many coastal areas saw a significant spike in insurance premiums.

• Government efforts—Governments and regulatory bodies are also addressing these challenges. Some are exploring ways to spread the financial burden of natural disasters more evenly, helping insurance remain accessible and affordable. This may include initiatives to subsidize premiums or create public insurance programs for high-risk areas.

We’re Here to Help

Contact All Affordable Insurance Agency in Tampa, Florida, today to learn more about how climate change may impact your coverage needs and rates.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.