Insurance crisis that started in Florida, California is spreading. Your state could be next

Rising insurance premiums due to multiple climate disasters in several states are causing a shift in the real estate market. This crisis, also referred to as an insurance crisis, is particularly noticeable in states like Florida and California. The increased premiums and strict insurance requirements have caused deal cancellations in both the residential and commercial sectors.

According to Bill Baldwin, owner of Boulevard Realty in Houston, insurers are making demanding demands during deals that are about to close. This has led to the rejection of properties with roofs seven or ten years old, insisting on tree removal near homes, even if the trees are on neighbors’ property, ultimately causing deals to fall through due to the inability to secure insurance.

In the commercial sector, Ross Markowitz of AEW Capital Management said insurers’ demands for pricing changes could impact the value of potential real estate transactions. This new insurance climate can cause buyers to reduce their bids due to uncertainty in pricing insurance.

This recent change arises from mounting losses of the insurance industry from natural disasters since 2017. The Insurance Information Institute records show nearly $80 billion in insured losses last year.

Insurance companies’ interests have grown in understanding and working with organizations such as First Street Foundation, which quantifies climate-related risks for insurance companies, demonstrating insurance companies’ response to increasing, frequent, and severe climate events, contributing to these higher premiums and challenges obtaining insurance.

Florida leads the states with skyrocketing insurance premiums, and over one million policies with its state’s insurer of last resort (Citizens) – three times higher than four years ago. This leads California and Louisiana with record levels of insurance claims due to hurricanes and wildfires in those states.

An increasingly concerning issue for corporations and the Site Selection industry is that rising premiums and insurance problems complicate site selection decisions due to increased costs and employee attraction complications.

Realizing these concerns, CNBC introduced modifications to the 2024 America’s Top States for Business study to consider regional commercial property casualty premium increases and the cost in each state for insuring a median priced home.

Some experts hold onto hope that the insurance rate hikes would decrease in 2025 once the insurance industry stabilizes after corrective measures. Nonetheless, lawmakers in affected states such as Florida and California have pursued legislative remedies, like enacting reforms to curb lawsuit numbers and simplifying insurance premium rise approvals. Yet, no predicted timeline is present on any action taken. In conclusion, many states are experiencing this climate and property disaster-induced insurance crisis and seeing changes in real estate trends with uncertainties, increasing costs, and regulatory attempts from lawmakers in attempt to aid the insurance industry’s condition.

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