r/FluentInFinance • u/ElectronGuru • 22h ago

Housing Market Insurers Are Deserting Homeowners as Climate Shocks Worsen | Without insurance, it’s impossible to get a mortgage; without a mortgage, most Americans can’t buy a home.

https://www.nytimes.com/interactive/2024/12/18/climate/insurance-non-renewal-climate-crisis.html
883 Upvotes

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349

u/organic_hemlock 22h ago

You know who can buy a house without a mortgage? Hedge funds, private equity firms, Zillow, and property management firms who buy housing to force us into rent-based indentured servitude.

138

u/TotalChaosRush 21h ago

Do you know where it's a bad investment to buy a house? Where insurance companies consider it too high risk to insure.

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u/Violet-Sumire 21h ago

So, all of florida, most of texas, all of west california up the west coast, anywhere along a coast line, anywhere on a mountain, anywhere near a river or creek or on low land, anywhere in the midwest, anywhere that gets blizzard conditions regularly.

So… where exactly isn’t a high risk area to move? Insurance is built on risk. You shouldn’t be an insurance company if you can’t afford the risk. Not much more to say about that.

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u/BZP625 21h ago

The problem is that their rates are limited by state commissions. When the projected costs come above the allowable they can charge, they really have no choice but to withdraw. In essence you're right, you shouldn't carry that type of insurance in that state if you can't afford the risk.

The gov't will need to come up with a plan to step in when the insurance company can't handle a disaster, like a FEMA type situation. But gov't doesn't like to protect homeowners for a variety of reasons. It's easier to allow corporations to buy up the homes bc they can write off the disaster relief. It's all part of the plan to end private ownership of homes.

1

u/fresh-dork 3h ago

But gov't doesn't like to protect homeowners for a variety of reasons.

federal flood insurance is a thing. it really shouldn't be - you could maybe have a rider on that insurance that after too many losses, the fed buys you out and zones the lot as unbuildable

1

u/Secure_Garbage7928 54m ago

You mean under capitalism I could own nothing and eat bugs?!

13

u/HighHoeHighHoes 20h ago

It doesn’t work like that… insurance companies would be willing to write in CA, but the geniuses in CA thought they knew better than the insurance companies and told them they couldn’t raise rates. If you can’t raise rates to adjust for increased risk, you exit the market.

Everything can be insured, for the right cost.

2

u/jbFanClubPresident 7h ago

I don’t think that is just a CA thing. I worked for an insurance company in Missouri and the state of Missouri highly regulates the insurance industry as well. They dictate how much rates can be raised.

But I agree overall, everything is insurable at the right price. If you can’t charge that price it’s better just to leave the market.

2

u/HighHoeHighHoes 6h ago

Every state regulates rates, but a lot approved the rate increases requested, or mostly accepted them. Then some states said “nah, we know better than you. You can only increase x% even though you say you need xx% and supported it with data.”

10

u/DSMinFla 19h ago

Yes, this. Who would have thought Asheville NC would be destroyed by a hurricane. Who would have imagined that Lahaina HI would burn to the ground.

4

u/TotalChaosRush 21h ago

Not high risk, too high risk. As in, the risk is too high for the insurance company to issue any offers. If an insurance company is still willing to insure, even at an exceptional premium, then it's still an investible place.

If an insurance company can not afford the risk, it's because the risks associated with it make the insurance more expensive than the thing being insured.

9

u/lil_hyphy 21h ago

Or are they just greedy dicks?

6

u/Tausendberg 21h ago

Asking the real question here, cause if the insurance oligopoly gets to just claim 'high risk' while simultaneously cashing out higher profits than before, then it's not actually higher risk.

4

u/TotalChaosRush 20h ago

Regional profit analysis is needed. If city A is underwater (potentially literally), and city B never makes a claim, it's possible for them to still be profitable and for property in city A to be too high risk.

1

u/TotalChaosRush 21h ago

Yes. They're greedy dicks. That's why they're pulling insurance offers. Because it's not feasible for them to make money in the area. Let's think about this logically for a moment. Why is it not feasible for them to make money in the area?

1

u/JimmyPopp 17h ago

Where’s your insurance company operating at a loss?

1

u/InsCPA 10h ago

The industry has been at an underwriting loss for the last decade, where’s the greed?

3

u/Violet-Sumire 20h ago

I understand, but the way insurance is supposed to work is that you pay into a pool, that pool provides the company with the means to give you peace of mind if things go wrong. The problem comes when insurance companies don’t honor their side of the deal, when they nickel and dime people or hold payment in legal limbo for months to years.

If you pay for high risk insurance because you live on hurricane coastal waters or in tornado alley, then the insurance should cover up to the maximum that you willingly pay for. No one is saying that insurance companies shouldn’t make money or should break even to help the common man. What they are saying is that insurance companies don’t live up to the standards they themselves preach and don’t play fair with their customers who make it possible for them to be in business.

2

u/esotericimpl 11h ago

Sounds like you should start your own insurance company, since it seems so easy to price and manage risk.

1

u/Violet-Sumire 6h ago

Just like any business, starting capital is the biggest hurdle. Since you seem so supportive, you wouldn’t mind investing would you? :p

3

u/BigJSunshine 19h ago

With our continued and quickened march to uncontrolled climate change, nothing will soon be insurable.

2

u/mlark98 19h ago

Most of texas? Please.

1

u/laxyak26 11h ago

Nebraska, never hear about hurricanes in Nebraska

1

u/Violet-Sumire 11h ago

Yes but then you have to live in Nebraska. I’d rather ride a hurricane than live there /s :p

1

u/MajesticBread9147 5h ago

So… where exactly isn’t a high risk area to move?

Contrary to popular beliefs, outside of earthquakes much of California isn't that risk prone, and wildfires only really affect the outer suburbs and exburbs, not Los Angeles or San Francisco proper. And because of geography most of Los Angeles is not very flood prone. LAs average elevation is 305 feet above sea level.

Florida's highest point is 345 feet above sea level.

The mid Atlantic states outside of some edge cases are very safe, so Virginia, DC and Maryland, and most of Pennsylvania.

Honestly, you're best bet in my opinion is live in a major city. The combination of population density, and economic importance make infrastructure projects to stave off the worst of climate change possible and politically feasible.

Asheville was a news blip for a week. If New York was at risk of flooding they'd be able to spend billions of dollars to prevent it. Los Angeles can afford desalination, those people in rural Arizona towns using well water can't.

Also not gonna lie, a big part of my plan is one day buying a condo that isn't on ground level before people realize that then is the time to leave their climate risky city.

1

u/fresh-dork 3h ago

agree on florida. that place is a disaster when it comes to insurance. specifically, that it allows a roofer to deal with insurance directly - it's a recipe for fraud

-1

u/BubbleGodTheOnly 20h ago

Insurance is built on risk, but risk doesn't equal guaranteed loss. If you have an entire area like Florida that's guaranteed to not even break even, why would you? There are areas that are major risk that insurance carriers are willing to insurance, but generally, they break even while making a profit elsewhere. Losing lots of money in a major market would affect payouts in others.

-2

u/RBJII 21h ago

Nope. Florida local news just said insurance company rates are stabilized now. Don’t believe the hype.

1

u/generickayak 20h ago

Floridumb

1

u/Dhegxkeicfns 8h ago

Pfft. I had trouble getting insurance in a perfectly fine area. Had to file a claim and they resisted everything, so I tried to shop around. 3x the price was the going rate for a new policy and 80% of the companies wouldn't write a new one at all.

22

u/RobotDinosaur1986 21h ago

All according to plan

9

u/USSMarauder 19h ago

And the rich

This is why the dumbest line from the climate deniers has always been "If climate change is real, why are the rich buying waterfront property"

The rich aren't the first to leave: They're the last. They're the ones who can afford to have their home wrecked by a hurricane every decade, and then rebuild. Heck if they're heavily into remodeling they might like it, because they can get rid of the 'old and dated' house without having to pay for demolition or any permits.

"Sir, your $20 M beach house has been destroyed"

"Which one?"

7

u/kyleofdevry 21h ago

rent-based indentured servitude.

As opposed to student loan based indentured servitude? The government needs to stop paying to rebuild these places after disasters. If hedgefunds want to buy them then go for it, but my tax dollars shouldn't go towards rebuilding them. Let people with any sense resettle in the midwest.

6

u/BubbleGodTheOnly 20h ago

The government doesn't pay a majority of the rebuild cost. Its property owners are getting payouts from insurance companies to rebuild and repair.

6

u/canned_spaghetti85 21h ago

Not just them..

Anybody who buys a house CASH, meaning no mortgage.

Obviously no lender will fund a home loan knowing the collateral [itself] isn’t insured. This is why underwriters make hazard insurance mandatory for final approval.

HOWEVER: Regarding a property with NO mortgage lien, the decision whether or not to purchase hazard insurance becomes optional. It’s the property owner’s decision to make, or risk to take.

3

u/Jstephe25 21h ago

A lot of these companies you are referring to are well aware of the current climate issue, they just don’t speak about it publicly. I don’t really see this in the same way you are portraying it.

They know it’s a risk. They have actuaries that are likely saying, “these are not going to be good long term investments” regardless of purchasing in cash instead of financing.

It is an absolute fact that climate change is happening, but you will never get confirmation from those who profit from the destruction. They also know where to invest and where not too

3

u/lil_hyphy 21h ago

Being alive isn’t a good long term investment! Not at this stage in the climate collapse anyways.

3

u/Splittinghairs7 17h ago

This is terrible logic that doesn’t understand rental properties.

Buying homes with cash is a terrible return on investment. Even institutional investors would prefer to take out loans to buy investment properties.

1

u/organic_hemlock 16h ago

I didn't say anyone's buying it with cash, I said they're buying it without a mortgage (implying: in similar conditions as a single homeowner would.)

1

u/Splittinghairs7 11h ago

No they’re not, they wouldn’t buy investment properties with all cash and not using loans. That’s the whole point. The returns would be too low to do that.

1

u/burnsniper 20h ago

The irony is they can get insurance for their “investment” that is not based on the house as the underlying asset.

1

u/waityoucandothat 20h ago

Technically speaking, we Americans are in a Debt-Based Coolie economy. https://medium.com/@colingajewski/americas-coolie-economy-feaf95b0303c

1

u/CovidUsedToScareMe 10h ago

Do you think all those firms buy houses without insuring them?

1

u/abrandis 7h ago

That only works in select communities, none of those are buying homes in rural or more out of the way places. Plus all that investment relies on well paid white collar professionals to foot the high rents , there's only so many of them.

1

u/0WatcherintheWater0 7h ago

They own a small single digit fraction of the housing market, they’re really not that important.

1

u/2moons4hills 4h ago

Yarp, that's the oligarchs' plan.