• Private home insurers are dropping a growing number of customers in most states, a Senate report found.
• That leaves homeowners at risk, turning to more expensive last-resort options or going uninsured.
• While Florida has managed to reverse the trend somewhat, the risk to homeowners is set to intensify.

As Americans flock to places in the US vulnerable to natural disasters, private home insurance companies are running the other way.

The problem has left a rising number of homeowners with just one option to cover property damage: insurers of last resort.

The scale of homeowners losing their plans became clearer on Wednesday after a Senate Budget Committee investigation found that private insurers' nonrenewals spiked threefold in more than 200 counties between 2018 and 2023.

"What our new data reveal is that the failure to deal with climate change is also affecting whether families can even get homeowners insurance, which threatens their ability to get a mortgage, which spells trouble for property values in climate-exposed communities across the country," Senate Budget Chairman Sheldon Whitehouse said in releasing the report.

A recent study by Harvard University's Joint Center for Housing Studies found that between 2018 and 2023, the number of properties enrolled in California and Florida's insurers of last resort more than doubled. A similar trend is playing out in Louisiana. While Florida has reduced participation this year, it still has the highest enrollment in the country.

The problem isn't isolated to the most predictable states. The Senate Budget Committee found that the rate of homeowners losing their private insurance also rose in Hawaii, North Carolina, and Massachusetts.

Policymakers and insurers are trying to stabilize the private market, by enacting new laws and overhauling regulations. However, with scientists predicting that climate-fueled disasters will become more frequent and severe for the foreseeable future, the risk to America's homeowners is mounting.

Growing insurance risk has some states looking for solutions

In nearly three dozen states, insurers of last resort, known as Fair Access to Insurance Requirements, or FAIR, are available to homeowners and businesses who struggle to find insurance on the private market.

The numbers are rising because private insurers are pulling back coverage and hiking premiums in areas at risk of wildfires, hurricanes, flooding, and other disasters often made worse by climate change.

While state-mandated FAIR plans are designed to be a backstop, insurance regulators and private insurance companies are alarmed by how many homeowners and businesses are enrolling, especially in California and Florida. The plans are often more expensive and provide less coverage. Plus, saddling one insurer with the riskiest policies increases the chances of one major disaster sinking the system and leaving taxpayers and insurance companies with the bill.

Florida and California are trying to reverse the trend, and Florida has seen some progress. The state's insurer of last resort, Citizens Property Insurance Corporation, said on December 4 that its policy count dropped below 1 million for the first time in two years.

Mark Friedlander, a spokesperson for the Insurance Information Institute, said the drop reflects a series of changes in recent years to stabilize the state's private insurance market after more than a dozen companies left the state or stopped writing new policies.

The Florida legislature passed laws to curb rampant litigation and claim fraud that drove up legal costs for private insurers. Friedlander said insurance lawsuits in the first three quarters of 2024 are down 56%, compared with the first three quarters of 2021 — the year before the new laws were enacted. Citizens also started a "depopulation" program that shifts customers to the private market. State regulators in October said they had approved at least nine new property companies to enter the market, and premiums weren't rising nearly as much as last year.

In California, many of the deadliest and most destructive wildfires have occurred within the last five years. As a result, some private insurers are hiking premiums and limiting coverage in risky areas, pushing more homeowners to the insurer of last resort. The Harvard study found that policies in the state's FAIR plan doubled between 2018 and 2023 to more than 300,000. As of September, the California Insurance Commission said policies totaled nearly 452,000.

The commission is working to overhaul regulations to slow the trend, including requiring private insurers to sell in risky areas. In exchange, it should be easier for companies to raise premiums that factor in reinsurance costs and the risks of future disasters. That should help stabilize rates, said Michael Sollen, a spokesman for the commission.

Sollen added that in the past, private insurers could seek approval for higher premiums but weren't required to offer coverage in wildfire-prone areas.

"In a year from now, what's happening with the FAIR plan will be a key measure for us," he said. "We expect to see those numbers start to stabilize and go down."

A mounting home insurance crisis

Still, a reduction in state-backed plans isn't necessarily a sign of progress, Steve Koller, a postdoctoral fellow in climate and housing and author of the Harvard report, told Business Insider.

A growing number of homeowners in places like Florida, Louisiana, and California are purchasing private insurance from nontraditional providers barely regulated by state governments. These so-called "non-admitted" insurers don't contribute to a state fund that guarantees homeowners will have their claims paid even if the insurance provider fails, leaving their customers without access to this backup coverage.

"Someone could be moving to a private insurer from Citizens, and that insurer might have higher insolvency risk," Koller said.

He added that more homeowners are opting out of insurance altogether. The number of US homeowners going without insurance has soared from 5% in 2019 to 12% in 2022, the Insurance Information Institute reported.

Plus, Americans are increasingly moving into parts of the country most vulnerable to extreme weather. Tens of thousands more people moved into the most flood—and fire-prone areas of the US last year rather than out of them, the real estate company Redfin reported earlier this year.

As insurers of last resort try to shift more risk to the private market, home insurance premiums are expected to keep rising. That's especially true in the areas hardest hit by climate-fueled disasters.

If private insurers exit hard-hit regions en masse in the future, Koller said states might need to become the predominant insurance provider in the same way the National Flood Insurance Program took over after the private market for flood insurance collapsed in the 1960s. Most flood insurance plans are still issued by the federal government.

"My guess is states are going to work very, very hard to avoid that and ensure the existence of a robust private market, but that's a parallel that I can't personally unthink about," he said.

Have you struggled to get home insurance, moved to an insurer of last resort, or gone uninsured? Contact these reporters at [email protected] or [email protected].

• Floridian homeowners face mounting uncertainties following hurricanes Helene and Milton.
• One resident is afraid of residents abandoning homes after storms if they can't pay to be fixed.
• An inland real-estate agent worries that some snowbirds won't return to buy new properties.

A destructive hurricane season has dealt a blow to Florida's housing market, which was already struggling with surging homeowners' association costs and a home insurance crisis.

In October, the five metropolitan areas nationwide with the biggest year-over-year drops in pending home sales were all located in the Sunshine State, according to a new report from real-estate site Redfin.

Over a four-week period ending November 10, pending home sales dropped 15.2% in Ft. Lauderdale, 14% in Miami, 13.8% in West Palm Beach, 9.5% in Jacksonville, and 7.2% in Tampa.

In Tampa, pending home sales actually fell as much as 32.2% during the month prior, when both Hurricanes Milton and Helene made landfall. The drop has leveled out at 7.2%, indicating the worst impacts may be over.

Pending home sales are deals where a contract is signed, but the sale has not closed. With a typical window of one to two months between the sales of homes and their closings, pending home sales can be an early indicator of market shifts.

Hurricanes Helene and Milton have exacerbated concerns about the future of property values and the cost of homeownership in Florida. After the storms, which made landfall in September and October, the state suffered an estimated $21 to $34 billion in damages, including uninsured properties.

At the same time, insurance experts have raised the alarm that an affordability crisis is likely to worsen. Some Florida cities, like Jacksonville and Cape Coral, saw average home insurance payments for mortgaged single-family residences jump at least 85% since 2019, according to financial services company Intercontinental Exchange.

"Florida represents an outsize amount of risk compared to other areas of the world," Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, told Business Insider in October.

For some residents, the mood on the ground is anxious.

Three Florida homeowners shared their concerns about the cost of rebuilding after hurricane damage, their home values, and the storms' impact on seasonal residents who are key drivers of the state economy.

Retirees couldn't afford to raise their home, then it was hit by a hurricane

In 2021, Jon and Lyn Drake purchased a home in Yankeetown, Florida, which is about two hours north of Tampa and less than 10 minutes from the shores of the Gulf of Mexico.

Their 800-square-foot house, located just feet away from a small riverbed, had belonged to a neighbor who died and cost them $190,000.

The dream home soon turned into a nightmare for the retired couple, aged 71 and 69. Last fall, Hurricane Idalia floodwaters reached within a foot of the house, the closest it had ever been, prompting Jon to look into services that could raise the home.

The Drakes said they were quoted prices to lift the house from around $130,000 to as high as $229,000, which they felt they couldn't afford.

"There's not a lot of companies that do it here, and it's just really price-gouging right now," Jon told BI.

Then Hurricane Helene barreled through Yankeetown. The couple lost their kitchen appliances, washer and dryer, and a new generator. The floors will have to be torn up.

For now, the couple is waiting to see how their insurance claims shake out to figure out their next steps. They want to rebuild, but are worried about how much of the cost they'll have to shoulder themselves.

"We're in a holding pattern right now," Jon said.

A coastal resident worries about his home value

John Adams, a retiree who lives near Yankeetown in Inglis, said his home was 15 inches away from taking on water during Hurricane Helene.

His home, raised 12 feet above ground, is the highest in his neighborhood, he said.

With the increasing power of storms coupled with skyrocketing insurance costs, Adams worries about homeowners in a pinch walking away from devastated homes. That could, in turn, lower the quality and value of the neighborhood. As Adam sees it, it's in his best interest to help pay for other peoples' homes to be raised.

"I'm in favor of paying for somebody else's fund to raise their homes. Because if we can solve that problem, it helps my values," he said.

Adams thinks either taxes could be raised or a new state agency could be created specifically to focus on raising low-lying homes that are most at risk. Currently, regional authorities like the Southwest Florida Water Management District are tasked with flood prevention and FEMA provides grants to some homeowners after a disaster.

"Nothing is ever going to fix or safeguard homes from flooding except 'elevate, elevate, elevate,'" he said "You can't outrun the water."

A real-estate agent thinks snowbirds could get scared away

In Ocala, located an hour from the Gulf of Mexico coastline, real-estate agent Emily White worries about how the severity of this year's storm will impact the snowbirds.

The annual migration of mostly elderly residents from cold-weather states who flock to the Florida sunshine to ride out the winter months plays a key role in the state's economy.

An estimated 1.5 million seasonal residents make up the snowbird flock, according to the Associated Press, representing a temporary 6.5% bump in the state's population.

"I'm praying the snowbirds come back this year. I need them to come back so I can get some of my listings sold, but we'll see how it's affected," White told Business Insider. "Will they come as hot and heavy as they did before these storms?"

White said a potential buyer from Arizona called her after seeing the devastation of Hurricane Milton, wondering if she might need to alter her plans to buy and how the storms would affect home-insurance costs.

Even if there's no immediate impact this winter, White expects the hurricane jitters to leave a lasting impact. Buyers who were looking at coastal properties might move more inland and some prospective buyers may choose to rent instead, she told BI.

"I think it'll deter people overall," White said.