US demands climate data as insurers make cover unaffordable

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The US government is demanding data from US insurers as it probes whether more frequent and extreme hurricanes and wildfires are making insurance unaffordable for American homeowners.

Insurers will be asked to provide information about their home insurance policies, premiums, claims and losses at a zip-code level for six years between 2017 and 2022. 

Graham Steele, the US Treasury assistant secretary for financial institutions, said that over the past five years there had been a fivefold increase in the number of billion-dollar disasters compared to the 1980s.

But insurance covered only 60 per cent of the $165bn losses from climate-related disasters in 2022, Steele said.

“Climate change is making it increasingly difficult for homeowners and consumers to find available and affordable insurance,” he said.

In recent months, several large insurers had begun to decline to write new policies in certain areas, he added, or even pulled out entirely due to climate-related events. More than a dozen states had experienced double-digit rate increases by their largest home insurers over the past year. 

The Treasury first proposed collecting underwriting data from US insurers in October 2022, and faced objections from businesses complaining that the plans would further push up costs for insurers. 

In response, the Treasury has limited the scope of its data collection to insurance providers that write 1 per cent or more of the US homeowners insurance market. These companies collectively underwrote about 70 per cent of US homeowners’ premiums, it said. 

The Treasury’s proposals have highlighted the fragmented nature of US insurance regulation. The industry is overseen at a state level and lacks a federal regulator to monitor the overall picture across the country.   

Although the Federal Insurance Office, operating within the Treasury, was given the authority to collect data on the US insurance market by the post-financial crisis Dodd-Frank Act in 2010, it lacks supervisory authority.

The Treasury had not yet decided its next steps following receipt of insurance data, an official said, and was trying to establish a “firm, data-driven, empirical baseline” for the scope of the industry’s climate-related problems and the extent to which consumers were affected.

Reinsurance group Swiss Re calculated the global insurance industry had racked up $50bn in losses from natural disasters in the first six months of 2023, marking the worst start to a year since 2011.

Global temperatures have risen at least 1.1C since the pre-industrial era, the UN Intergovernmental Panel on Climate Change has concluded, with each fraction of a degree of warming leading to more frequent and extreme weather events.

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