Home insurance premiums are soaring in areas most impacted by climate-related disasters, according to a new Treasury Department report. From 2018 to 2022, insurance premiums in high-risk regions averaged $2,321—82% more than in low-risk areas. The escalating costs coincide with an increase in natural disasters, which are placing unprecedented pressure on homeowners and insurers.
“Homeowners insurance is becoming more costly and less accessible for consumers as the costs of climate-related events pose growing challenges to both homeowners and insurers alike,” said Nellie Liang, the Treasury’s undersecretary for domestic finance.
Alarming Trends in Climate-Driven Losses
The report reveals that from 2018 to 2022, there were 84 disasters costing $1 billion or more, excluding floods, with combined damages totaling $609 billion. Wildfires in the Southwest burned 3.3 million acres, while hurricanes in the Southeast drove claim frequency 20% above the national average. Nonrenewal rates in high-risk areas were 80% higher than in low-risk areas, further compounding the challenges faced by homeowners.
California and the Wildfire Crisis
California has borne the brunt of climate-related losses, with wildfires during the study period causing claims averaging nearly $27,000—50% higher than the national average. Recent wildfires in Los Angeles have displaced 180,000 homeowners, killed at least 25 people, and destroyed multi-million-dollar homes in the Pacific Palisades area.
Treasury Secretary Janet Yellen emphasized the significance of these trends, noting that the annual total of climate disasters nearly doubled compared to 1960-2010. “This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families,” she said.
Insurance Challenges Beyond California
The report also highlighted issues in other regions. In the Southeast, hurricanes such as Hurricane Milton in 2024 caused widespread flooding and pushed claim averages to $24,000 in higher-risk areas. Nonrenewals in these areas have risen significantly, leaving many homeowners struggling to find coverage.
A Call for Action
With the Treasury Department releasing the report in its final days under the current administration, officials urged the incoming administration to prioritize climate-driven insurance challenges. “We certainly are hopeful that our successors stay focused on this issue and continue to produce important research,” an official said.
As climate-related events intensify, both policymakers and insurers face growing pressure to develop solutions that protect homeowners and stabilize the insurance market.