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Major insurers such as Allstate Corp (NYSE:ALL), American Family Insurance, Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B), Nationwide and Erie Insurance Group are reportedly reducing or eliminating coverage for extreme weather events due to climate change.
This follows Hurricane Idalia which made landfall in Taylor County within Florida's Big Bend region, near Keaton Beach, as a Category 3 hurricane.
Unprecedented disasters linked to climate change have escalated claims costs, putting pressure on insurance markets, The Washington Post reported.
A release from Verisk Analytics, Inc. (NASDAQ:VRSK) estimated that industry-insured losses to onshore property for Hurricane Idalia will range from $2.5 billion to $4 billion. The industry loss estimate included gauged wind damage and insured storm surge estimates across Idalia's track.
Also Read: Hurricane Idalia Strikes Florida's Gulf Coast As Category 3 Storm
Insurers are excluding protection from weather events such as hurricanes, wind, hail and wildfires in areas prone to such disasters, raising premiums and deductibles, The Washington Post report added.
Allstate's climate risk mitigation strategy would likely include "limiting new [auto and property] business … in areas most exposed to hurricanes" and "implementing tropical cyclone and/or wind/hail deductibles or exclusions where appropriate," the report noted.
While Nationwide already stopped underwriting coverages for properties near the coastline amid hurricane fears, the company said "more targeted hurricane risk mitigation actions are being finalized and will start by year-end 2023," mentioned the report. From 2020, the company also reportedly reduced its exposure in some of California's highest-hazard wildland-urban interface areas.
Also See: As Florida Surveys Damage After Hurricane Idalia, Here's What It Means For Stocks And Recovery Costs
Berkshire Hathaway warned of possible policy terms and conditions changes that will likely be revised to reflect changes in such risks.
Over the past three years, the U.S. insurers have paid a record $295.8 billion in natural disaster claims, prompting a reevaluation of risk concentrations, the report said, citing numbers from international risk management firm Aon.
As insurers reduce coverage, state governments face the challenge of offering insurance policies as a "last resort" while being susceptible to climate risks.
Photo: Damage from Hurricane Idalia via Shutterstock
