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> In some coastal U.S. cities, it’s not just the hurricanes and floods putting homes at risk, it’s the cost of insurance itself that’s becoming unsustainable I

> In some coastal U.S. cities, it’s not just the hurricanes and floods putting homes at risk, it’s the cost of insurance itself that’s becoming unsustainable It is the disasters that are causing the insurance to become unaffordable. You can go read the financial reports for these insurance companies. They are losing money hand over fist in disaster prone areas. The industry as a whole typically loses money on underwriting home insurance, at best they have a year or two in a decade where they make a point or two in profit.

giggyhack 1y ago
Can you link to one of these reports that shows a breakdown by high disaster areas?
- thevillagechief 1y ago
  My previous job was at an insurance company in part of the country that is not disaster prone. Even then, once in a decade hailstorms would essentially wipe out reserves and necessitate reinsurance. It would take probably 5 years to recover from the effects. You always had your fingers crossed during hail season that you'd finish the year in a position to get some bonuses. And this was a mutual insurance company, so no quarterly shareholder pressure, just long-term sustainability goals. That company would never dare expand into Florida.
- stronglikedan 1y ago
  [dead]
- dghlsakjg 1y ago
  Here's a white paper talking about the history of FL specifically: https://floridapolicyproject.com/wp-content/uploads/2024/05/FINAL_Florida-Insurance-Market-Report.pdf https://floridapolicyproject.com/wp-content/uploads/2024/05/... You can pull the annual reports for any publicly traded insurance company if you are curious about the numbers.
mmargenot 1y ago
Fundamentally the goal of an insurance company is to pool risk and distribute it so that catastrophic events can be covered. These areas have too much risk (and certainty in the occurrence of catastrophic events) for the pooling to be viable.
- maerF0x0 1y ago
  I cant say I understand this, to me it seems like if you know the averages of claims across time will be $X, then you just sell the premium for >$X . Like it could be seemingly absurd, like if you expect to replace a house every 10 years, then you do annual premium >= ($REPLACEMENT/10) . (all averaged across the pool)
  - mmargenot 1y ago
    The pools can be different based on the US state and the type of insurance based on the location where the insurer is doing business. For a region where a major dangerous weather event is a certainty on a yearly basis, I (a layman in insurance) would expect the premium would approach just the full cost of replacing the property rather than being something you barely think about once a year. Hence the pricing out.
  - mint5 1y ago
    Well there’s overhead like cost of administering the claims etc etc so actually if it were literally replacing the house every 20 years the annual premium would be like house$ / 10 not 20. But if it gets even remotely close to that point the yearly insurance is a significant portions of the house worth and it’s obviously not affordable/insurable - whatever term one wants to use. At that point if one can’t self insure then they can’t afford the house
  - dghlsakjg 1y ago
    Part of the problem is that insurers are in the business of predicting the future, which has gotten very hard recently (global warming, cost shocks). The other constraint is that, jurisdiction dependent, rate hikes are subject to regulatory approval. Most importantly, the insurance industry does not make much if any money on underwriting. They make their money on investing the float, which only exists if they sell policies. That’s why insurers for the most part are ok posting slightly negative margins on their underwriting.
toomuchtodo 1y ago
Disaster prone areas are uninsurable due to climate change costs. This is market signal to not live or build there. Some will be sad, sadness is unavoidable. Citations: https://news.ycombinator.com/item?id=44477195 https://news.ycombinator.com/item?id=44477195 https://news.ycombinator.com/item?id=43366311 https://news.ycombinator.com/item?id=43366311 https://news.ycombinator.com/item?id=42450680 https://news.ycombinator.com/item?id=42450680 https://news.ycombinator.com/item?id=41664750 https://news.ycombinator.com/item?id=41664750 (top comment of this thread aggressively relevant) https://www.hbs.edu/ris/Publication%20Files/24-051_f1329bc3-d296-4ffa-aff3-a9e4b8e98e9d.pdf https://www.hbs.edu/ris/Publication%20Files/24-051_f1329bc3-...
- nouveaux 1y ago
  > Some will be sad, sadness is unavoidable. That's one way of putting it. The other way of putting it is that the affected are bearing the cost of climate change imposed on them by the rest of society, who are benefiting.
  - JackYoustra 1y ago
    Ah yes, the climate concerned citizens of Florida. It so happens that they don't seem particularly concerned as far as macro solutions are concerned.
FireBeyond 1y ago
Not to mention, taxpayers across the country are subsidizing federal insurance programs for people to rebuild those homes in the exact same location. I get ties to communities. I get "socialism" - I'm all for universal healthcare. But maybe there are limits, you get one issue. If you live in a flood zone, your house gets rebuilt, and it floods again, maybe the requirement of that insurance is relocation. As it stands, there are people who have had their home rebuilt three times in 20 years in the same location through insurance and FEMA. I'm not saying that from the perspective of "that must be nice" - losing valuables, all the issues with flooding, are entirely horrible and unpleasant. But at what point do we as a society say "Y'know, maybe just don't build there... again."
- miningape 1y ago
  Alternatively maybe this could be a good case for insurance funding part of the physical infrastructure to protect the houses e.g. sea walls.
TYPE_FASTER 1y ago
And seeing as my premiums have been doubling every 8 years or so, I'm assuming that cost is distributed across everybody.
- dghlsakjg 1y ago
  Not necessarily. A confounding factor is that construction and materials have gotten much more expensive. You aren't insured for what your house cost to build 20 years ago, you are insured for what it would cost to rebuild it after a disaster.| The price of construction lumber quadrupled during COVID (it has since receded some), so all of a sudden the cost to frame a house went up by a significant margin, which means that the cost to insure against the future possibility of framing a house goes up too.

giggyhack 1y ago

Can you link to one of these reports that shows a breakdown by high disaster areas?

thevillagechief 1y ago
My previous job was at an insurance company in part of the country that is not disaster prone. Even then, once in a decade hailstorms would essentially wipe out reserves and necessitate reinsurance. It would take probably 5 years to recover from the effects. You always had your fingers crossed during hail season that you'd finish the year in a position to get some bonuses. And this was a mutual insurance company, so no quarterly shareholder pressure, just long-term sustainability goals. That company would never dare expand into Florida.
stronglikedan 1y ago
[dead]
dghlsakjg 1y ago
Here's a white paper talking about the history of FL specifically: https://floridapolicyproject.com/wp-content/uploads/2024/05/FINAL_Florida-Insurance-Market-Report.pdf https://floridapolicyproject.com/wp-content/uploads/2024/05/... You can pull the annual reports for any publicly traded insurance company if you are curious about the numbers.

mmargenot 1y ago

Fundamentally the goal of an insurance company is to pool risk and distribute it so that catastrophic events can be covered. These areas have too much risk (and certainty in the occurrence of catastrophic events) for the pooling to be viable.

maerF0x0 1y ago
I cant say I understand this, to me it seems like if you know the averages of claims across time will be $X, then you just sell the premium for >$X . Like it could be seemingly absurd, like if you expect to replace a house every 10 years, then you do annual premium >= ($REPLACEMENT/10) . (all averaged across the pool)
- mmargenot 1y ago
  The pools can be different based on the US state and the type of insurance based on the location where the insurer is doing business. For a region where a major dangerous weather event is a certainty on a yearly basis, I (a layman in insurance) would expect the premium would approach just the full cost of replacing the property rather than being something you barely think about once a year. Hence the pricing out.
- mint5 1y ago
  Well there’s overhead like cost of administering the claims etc etc so actually if it were literally replacing the house every 20 years the annual premium would be like house$ / 10 not 20. But if it gets even remotely close to that point the yearly insurance is a significant portions of the house worth and it’s obviously not affordable/insurable - whatever term one wants to use. At that point if one can’t self insure then they can’t afford the house
- dghlsakjg 1y ago
  Part of the problem is that insurers are in the business of predicting the future, which has gotten very hard recently (global warming, cost shocks). The other constraint is that, jurisdiction dependent, rate hikes are subject to regulatory approval. Most importantly, the insurance industry does not make much if any money on underwriting. They make their money on investing the float, which only exists if they sell policies. That’s why insurers for the most part are ok posting slightly negative margins on their underwriting.

toomuchtodo 1y ago

Disaster prone areas are uninsurable due to climate change costs. This is market signal to not live or build there. Some will be sad, sadness is unavoidable. Citations: https://news.ycombinator.com/item?id=44477195 https://news.ycombinator.com/item?id=44477195 https://news.ycombinator.com/item?id=43366311 https://news.ycombinator.com/item?id=43366311 https://news.ycombinator.com/item?id=42450680 https://news.ycombinator.com/item?id=42450680 https://news.ycombinator.com/item?id=41664750 https://news.ycombinator.com/item?id=41664750 (top comment of this thread aggressively relevant) https://www.hbs.edu/ris/Publication%20Files/24-051_f1329bc3-d296-4ffa-aff3-a9e4b8e98e9d.pdf https://www.hbs.edu/ris/Publication%20Files/24-051_f1329bc3-...

nouveaux 1y ago
> Some will be sad, sadness is unavoidable. That's one way of putting it. The other way of putting it is that the affected are bearing the cost of climate change imposed on them by the rest of society, who are benefiting.
- JackYoustra 1y ago
  Ah yes, the climate concerned citizens of Florida. It so happens that they don't seem particularly concerned as far as macro solutions are concerned.

FireBeyond 1y ago

Not to mention, taxpayers across the country are subsidizing federal insurance programs for people to rebuild those homes in the exact same location. I get ties to communities. I get "socialism" - I'm all for universal healthcare. But maybe there are limits, you get one issue. If you live in a flood zone, your house gets rebuilt, and it floods again, maybe the requirement of that insurance is relocation. As it stands, there are people who have had their home rebuilt three times in 20 years in the same location through insurance and FEMA. I'm not saying that from the perspective of "that must be nice" - losing valuables, all the issues with flooding, are entirely horrible and unpleasant. But at what point do we as a society say "Y'know, maybe just don't build there... again."

miningape 1y ago
Alternatively maybe this could be a good case for insurance funding part of the physical infrastructure to protect the houses e.g. sea walls.

TYPE_FASTER 1y ago

And seeing as my premiums have been doubling every 8 years or so, I'm assuming that cost is distributed across everybody.

dghlsakjg 1y ago
Not necessarily. A confounding factor is that construction and materials have gotten much more expensive. You aren't insured for what your house cost to build 20 years ago, you are insured for what it would cost to rebuild it after a disaster.| The price of construction lumber quadrupled during COVID (it has since receded some), so all of a sudden the cost to frame a house went up by a significant margin, which means that the cost to insure against the future possibility of framing a house goes up too.