While the President and some members of his Cabinet may not think there is climate change going on, insurance companies do. The insurance companies determine the premiums to insure they make money on both ensuring the premiums and investing the surpluses. If a natural disaster happens more than the once in a 100-year scenario, the AI data means the price of home insurance premiums increase unless the amount the person has to pay first increases. The insurance company are in the risk allocation business, and they like less risk to themselves.

In an artice by Claire Brown and Mira Rojanasakul of the New York Times News Service, a homeowner in Lafitte, Louisiana which has been in the family for 5 generations, has seen the premium increase to $8,312 more than doubling in the past 4 years. The house is on a small coastal community and has been raised with stilts.

The homeowner is considering selling, but the home values have fallen 38% since 2020 as people cannot afford the higher insurance premiums, the area is dotted with for-sale signs.

New research shared with the New York Times on where insurance costs have risen the most and how they are affecting home values. Since 2018, a shock in the home insurance market has meant that homes in the ZIP codes most exposed to hurricanes and wildfires, would sell for an average of $43, 900 less than they would otherwise found. The research analyzed tens of millions of housing payments through 2024.

Changes in the reinsurance market is a helping drive the trend. Insurance companies purchase reinsurance to help limit their exposure when a catastrophe hits. Global reinsurance companies have been raising the rates.

Benjamin Keys at the Wharton School of the University of Pennsylvania and Philip Mulder of the University of Wisconsin-Madison analyzed 74 million home payments between 2014 and 2024. The researchers found a rapid repricing of disaster risk had been responsible for about 1/5 of overall home insurance increases since 2017. Another 1/3 could be explained by construction costs.

The researchers found that in ZIP codes most vulnerable to catastrophes rising insurance premiums weigh down home values by about $20,500 in the top 25% of the most exposed ZIP codes, if you go to the top 10 ZIP codes the number is closer to $43,900.

In the parts of hail-prone Mid-western states, insurance now eats up more than 1/5 of the average homeowner’s total housing payments which include mortgage costs and property taxes. Remember without insurance no mortgage. In Orleans Parish, La the number is closer to 30%.

Higher insurance premiums and higher interest rates are making it harder for first-time buyers to afford to buy new homes.

According to Census Bureau data some 13% of US homeowners are uninsured, that is expected to increase and higher payments out of pocket if and when a disaster happens.

Linking to dividend paying stocks, similar to most things in life there are multiple parts that need to exist in the market is in order. While you may or may not like climate change, insurance companies are putting increasingly putting the risk on homeowners. As investors you need to look to the companies that adapt changing circumstances to continually make profits.

There are more questions than answers, till the next time – to raising questions.