U.S. Property Insurance Rates Rise Amid Climate Risks and Regulatory Changes

Property insurance rates in the U.S. have significantly increased since 2021, driven by factors such as the rising frequency of climate-related natural disasters, inflation in building material costs, and supply chain challenges. Homeowners have experienced an average premium increase of $648 annually from 2021 to 2024, with an expected nationwide rate increase of 8% in 2024. Some states, including Louisiana, anticipate even steeper hikes, up to 27%. Public perception links these rising costs primarily to climate change, with over 70% of homeowners attributing increased insurance costs to intensified natural disasters such as hurricanes, floods, and wildfires. There is a bipartisan consensus that insurance premiums are escalating too rapidly, as reflected in public opinion from states like Texas and Florida, where rate reductions and insurance affordability are major concerns. Insurance regulation in the U.S. occurs primarily at the state level, with ongoing debates in various states about methods to restrain rate increases. For instance, researchers in Iowa highlight climate change's role in cost rises and advocate for improved building standards and renewable energy transitions as mitigative strategies. On the federal level, government programs such as the National Flood Insurance Program and disaster relief efforts play key roles in risk-sharing and data provision for insurers. However, policy changes and funding cuts implemented during the Trump administration are cited by industry analysts as contributors to rising property insurance costs. Significant tariffs on key construction materials like lumber, steel, and aluminum have increased the cost of repairs and rebuilding, leading to higher insurance premiums. The American Property Casualty Insurance Association has actively opposed these tariffs due to their negative impact on insurance affordability. Additionally, reductions in federal disaster relief funding hinder communities’ ability to rebuild with enhanced resilience, which in turn can drive premium increases. The termination of programs like FEMA’s Building Resilient Infrastructure and Communities Program has ended critical mitigation funding that historically lowered risk and insurance costs. Similarly, the cessation of updates to NOAA’s billion-dollar disaster database reduces the availability of essential climate-related data needed by insurers to accurately price risk. The deletion of homeowners’ insurance cost reports from federal websites further limits transparency and data access for regulators and policyholders. Industry experts emphasize the necessity of comprehensive long-term climate and weather data to support accurate risk assessment and insurance pricing. Lack of such data forces insurers to operate with increased uncertainty, often leading to higher premiums as a protective measure against unquantified risks. The rollback of renewable energy initiatives and federal measures that previously supported climate risk disclosures have further complicated underwriting and risk management within insurance markets. The federal administration’s policies favoring expanded fossil fuel production, including approvals of new liquefied natural gas terminals, are seen as factors that may accelerate climate change impacts. This could ultimately increase risk exposure for insurers and communities, potentially resulting in higher property insurance premiums and reduced insurability in high-risk areas. Overall, the interplay of rising natural disaster risk, regulatory and policy shifts, funding reductions, and increased costs in building materials and repair contribute to an environment of accelerating property insurance rates. Stakeholders in the insurance sector are challenged by reduced availability of critical climate data and changing federal policies that affect risk mitigation and financial market stability.