Wildfires in Southern California and hurricanes in the Southeast US may lead to higher homeowners insurance rates for people thousands of miles away from the disasters. Regulators are allowing insurance companies to raise rates to cover costs of events that have been paid by insurers elsewhere, as well as increasing reinsurance funds.
Experts say this is a result of cross-subsidization across the country, where large shocks lead to big payouts in one area affecting others nationwide. However, the Insurance Information Institute disputes these claims, saying rates are determined by national risks and not based on local premiums being used to pay for disasters in other regions.
Regulations vary from state to state, with some allowing higher rate increases than others. Consumer groups argue that a stronger federal regulatory framework would lead to lower insurance costs nationwide. Insurers claim that risk-sharing is necessary for large, national companies.
Climate-related disasters are becoming more frequent and costly, contributing to 8.7% annual rate hikes in homeowners insurance. The US Treasury Department says this is the fastest rate of inflation since 2018. Rising disasters mean climate change is affecting Americans directly in their wallets.
Source: https://edition.cnn.com/2025/01/22/homes/la-fires-homeowners-insurance/index.html