Soaring home insurance costs due to surging climate-related events, says Treasury Department.

• According to a Treasury Department report, insurance costs for homeowners in regions affected by climate-related natural disasters are significantly increasing.
• The average premium for consumers in the top 20% of high-risk zip codes was $2,321, which is 82% higher than the average premium for those in the bottom 20% of low-risk zip codes from 2018-22.
• Janet Yellen, the outgoing Treasury Secretary, stated that the report highlights concerning patterns of increasing insurance costs, which pose a risk to the future financial stability of American households.

According to a Treasury Department report released Thursday, insurance costs for homeowners in regions affected by climate-related natural disasters are increasing.

The department's research from 2018-22, which includes data beyond that year, revealed that there were 84 disasters costing $1 billion or more, excluding floods, and that they resulted in a combined $609 billion in damages. Floods are not included in homeowner insurance policies.

While inflation increased by 8.7%, the cost of policies rose even faster, disproportionately affecting those in areas affected by climate-related events.

The average premium for consumers in the top 20% of riskiest zip codes was $2,321, which is 82% higher than the average premium for those in the bottom 20% of riskiest zip codes.

The growing challenges posed by climate-related events are making homeowners insurance more expensive and less accessible to consumers, according to Nellie Liang, undersecretary of the Treasury for domestic finance.

In the Los Angeles area, rescue workers are still fighting against wildfires, resulting in the death of at least 25 individuals and the displacement of 180,000 homeowners.

Janet Yellen, the Treasury Secretary, stated that the costs of the fires are yet to be determined, but she emphasized that the report highlighted a severe issue. In the analyzed period, there was almost twice the annual total of climate-related disasters as in the 1960-2010 period.

"Additionally, the wildfire disaster is not the only evidence of the impact of climate change on insurance coverage for Americans. Other climate-related events, such as severe storms in the Great Plains and hurricanes in the Southeast, also pose challenges in finding affordable insurance coverage. This report highlights the concerning trend of rising insurance costs, which threatens the long-term prosperity of American families."

In addition to payments, both homeowners and insurers in affected areas were also making contributions in other ways.

In higher-risk areas, nonrenewal rates were approximately 80% higher than in lower-risk areas, while insurers paid an average of $24,000 in claims compared to $19,000 in the lowest-risk regions.

The claim frequency in the Southeast, which encompasses states like Florida and Louisiana that are often hit by hurricanes, was 20% higher than the national average.

In the Southwest, including California, wildfires destroyed 3.3 million acres, with five events causing over $100 million in damages. The average loss claim was approximately $27,000, which is 50% higher than the national average. Additionally, nonrenewal rates for insurance were 23.5% higher than the national average.

With only three days remaining in the current administration, the Treasury Department released its findings, hoping that the incoming administration under President-elect Donald Trump will utilize the report as a starting point for action.

An official stated that they are hopeful that their successors remain focused on this issue and continue to produce significant research on it, while also considering innovative solutions.