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Is climate change making states uninsurable?

Extreme weather is changing the calculus of insurance coverage across the United States, as wildfires and floods leave property owners scrambling in California, Florida and Louisiana. But insurers are mostly overseen by the states, so there is no big-picture perspective on how climate risks are manifesting nationally. The U.S. Treasury is embarking on that statistical analysis for the first time.

“There are growing indications of insurance market stress in areas of the country vulnerable to climate change impacts,” a Treasury spokeswoman told DealBook. But to develop a national understanding, officials need “consistent, comparable data at a granular level,” she said. And they are not quite sure how to get that yet.

Federal officials are asking state regulators for help. In a recent email to local officials from the Federal Insurance Office, shared with DealBook by a source familiar with the effort, the Treasury’s insurance arm asked states what data they had on homeowner coverage, liabilities and losses by ZIP code over the past five years. For now, the insurance arm said it was “assessing how to timely gather relevant, reliable data.” But depending on responses, which are expected next week, it may have to turn to companies next.

Risk experts are keenly aware of rising climate costs. The number of natural disasters causing $1 billion or more in damages has grown steadily for more than 15 years, notes a new report from the consultancy Deloitte. It surveyed 27 state regulators, more than half of whom expect climate risks for insurers to continue climbing. “With losses mounting, insurers can no longer avoid or postpone addressing the impact of changing climate,” the report states, adding that regulators must ensure that companies are predicting and managing that exposure. The Center for American Progress, a think tank, recently called on regulators to identify and mitigate insurance industry climate risks, saying “the full severity and scope of the problem is difficult to determine” partly because of insufficient data.

Still, climate action just got more fraught. Last week’s Supreme Court decision limiting the Environmental Protection Agency’s ability to regulate carbon emissions was celebrated by many conservative lawmakers, but “growing risk from climate is already stressing insurers,” said Carolyn Kousky, the executive director of the Wharton Risk Center. “Now would be the time for insurance companies to be more vocal and create political pressure to act.”