Florida's Home Insurance Crisis: A Stark Warning About Climate Risks

The insurance landscape in Florida is undergoing a major upheaval as alarming data reveals a dramatic shift in the home insurance market. According to a recent report by Deep Sky Research, Florida's home insurance policies have decreased by an astonishing 78% over the last decade. This decline raises critical questions about the future of homeowners in the state and signals broader implications for the national economy.

As hurricane intensity increases and climate risks escalate, private insurance companies are fleeing the market, creating a vacuum filled predominantly by Florida's Citizens Property Insurance Corporation—the last resort for homeowners. This state-funded program has exploded from a mere 6% market share to a staggering 63%, highlighting the extent of the crisis.

The report titled "Uninsurable Florida's Home Insurance Collapse Signals National Trend" points out that Florida has essentially become 'uninsurable' for many. The number of active home insurance policies has plummeted from 3.2 million to just 710,000 over the past decade. The quarterly issuance of new policies has witnessed a catastrophic decline of 77%, from 164,000 to just 37,000.

While premiums have surged by 22% after adjusting for inflation, averaging $3,454 annually, this has not deterred insurers from exiting the market. In fact, the situation has only worsened, with the report linking these trends to the rise in hurricane frequency and intensity. Over the last 40 years, extreme hurricanes have surged by 300%, with maximum rainfall during storms increasing by 33%.

Deep Sky's findings emphasize that the damage caused by hurricanes is more often the result of flooding rather than wind, driven by rising sea levels. As storm surges reach further inland, coupled with atmospheric conditions that allow for greater moisture retention, the risk of severe rainfall during storms intensifies.

In 2024 alone, payouts from the National Flood Insurance Program exceeded the combined total of the previous 14 years, primarily due to storms like Hurricanes Ian and Helene. The implications of these findings are staggering: Florida's insurance crisis isn't just a localized issue; it has the potential to ripple across the economy.

Citizens Property Insurance's financial model, which relies on its $15 billion reserves, poses a risk to all Floridians. Should catastrophic losses occur, Citizens can impose surcharges on all forms of property and casualty insurance, potentially leading to hikes in auto, renters, and even commercial insurance rates.

Experts warn that this situation could lead to a catastrophic economic contagion. The freezing of property transactions due to the lack of affordable insurance could result in plummeting home values. Banks across the nation with significant mortgage investments in Florida might find themselves facing distress. Real estate investment trusts with Florida exposure could witness valuations nosedive, while municipal bonds backed by property taxes face downgrades.

The report outlines a cycle described as a financial 'death spiral,' where rising climate risks lead to losses, insurers abandon the market, and healthy customers are forced to drop coverage, thus concentrating even more risk. This self-reinforcing cycle accelerates the already perilous situation.

Max Dugan-Knight, a climate data scientist at Deep Sky, warns that time is running out. A significant storm could lead to catastrophic losses for Florida homeowners who are uninsured. As the insurance market delivers its verdict on the impacts of climate change, the rest of the economy may soon follow suit.

Deep Sky Research’s earlier studies have highlighted similar trends in California, where increased risks from wildfires have seen a dramatic rise in the state’s FAIR Plan. The economic implications of climate change are becoming increasingly evident, and Florida's insurance crisis serves as a stark warning for what could lie ahead.

About Deep Sky

Deep Sky is a Montreal-based company focused on carbon removal technologies, committed to addressing climate challenges by developing projects that permanently store carbon underground. With significant backing from various investors, Deep Sky emphasizes the urgent need for innovative climate solutions in light of the growing threats posed by climate change.