Climate change and insurance in the United States

The effects of climate change on extreme weather events is requiring the insurance industry in the United States to recalculate risk assessments for various insurance policies.^[1][2] From 1980 to 2005, private and federal government insurers in the United States paid $320 billion in constant 2005 dollars in claims (or about $499 billion in constant 2023 dollars) due to weather-related losses while the total amount paid in claims annually generally increased, and 88% of all property insurance losses in the United States from 1980 to 2005 were weather-related.^[3][4] Annual insured natural catastrophe losses in the United States grew 10-fold in inflation-adjusted terms from $49 billion in total from 1959 to 1988 to $98 billion in total from 1989 to 1998,^[5] while the ratio of premium revenue to natural catastrophe losses fell six-fold from 1971 to 1999 and natural catastrophe losses were the primary factor in 10% of the approximately 700 U.S. insurance company insolvencies from 1969 to 1999 and possibly a contributing factor in 53%.^[6] From 2005 to 2021, annual insured natural catastrophe losses continued to rise in inflation-adjusted terms with average annual losses increasing by 700% in constant 2021 dollars from 1985 to 2021.^[7]

In 2005, Ceres released a white paper that found that catastrophic weather-related insurance losses in the United States rose 10 times faster than premiums in inflation-adjusted terms from 1971 to 2004, and projected that climate change would likely cause higher premiums and deductibles and impact the affordability and availability of property insurance, crop insurance, health insurance, life insurance, business interruption insurance, and liability insurance in the United States.^[8] From 2013 to 2023, U.S. insurance companies paid $655.7 billion in natural disaster claims with the $295.8 billion paid from 2020 to 2022 setting a record for a three-year period,^[9] and after only the Philippines, the United States lost the largest share of its gross domestic product in 2022 of any country due to natural disasters while having the greatest annual economic loss in absolute terms.^[10] While home insurance, property insurance, and reinsurance premiums and catastrophe bond interest rates in the United States are increasing, research in extreme event attribution has estimated that of the $143 billion in annual average global economic losses from 2000 to 2019 due to claims related to extreme weather events caused by climate change, only 37% was attributable to property damage and 63% was attributable to the lost value of statistical lives from event fatalities.^[11][12]

Due to rising hospitalizations from the effects of climate change on human health (like heat stress and cardiorespiratory fitness impacts from wildfire smoke),^[13][14][15] health insurance companies in the United States are beginning to develop models for their policies related to climate risk.^[16] Health policy analysis published in June 2023 estimated that 65 million workers in the United States between the ages of 19 and 64 (or more than two-fifths of the U.S. labor force) are in occupations at increased risk for climate-related medical problems with non-white Americans and Americans with lower levels of educational attainment statistically overrepresented in such occupations and 16% of such workers lacking health insurance coverage (in comparison to 7% of workers not in such occupations).^[17][18] From 1980 to 2005, weather-related claims to the Federal Crop Insurance Corporation (FCIC) cost $43.6 billion in constant 2005 dollars (or about $68 billion in constant 2023 dollars) which represented 14% of all weather-related insurance losses in the United States during the period,^[19] and the FCIC's exposure to weather-related losses grew 26-fold to $44 billion in 2005 (or about $68.6 billion in constant 2023 dollars).^[3] In July 2021, research published in Environmental Research Letters estimated that county-level temperature increases from 1991 to 2017 accounted for 19% of crop insurance losses (amounting to $27 billion) on FCIC policies and approximately half of the losses in 2012 (the costliest year surveyed).^[20][21]