How Natural Disasters are Upending Insurance and Transforming the Labor Market
Wildfires, like those that raged throughout the Los Angeles area earlier this year, are causing major disruptions. They’re leaving employers and their employees scrambling. Evan Spiegel, CEO of Snap, reported that 150 of his company’s 2,000-person team were displaced. The company provided accommodations, travel, and other forms of support for employees, even making its office available to workers needing it. However, the long-term impact of natural disasters extends far beyond these immediate relief efforts.
Rising insurance costs and coverage limitations are creating financial challenges for businesses, especially in areas prone to natural disasters, and are worsening the already difficult insurance situation in California.
Between 2020 and 2022, insurance companies declined to renew 2.8 million homeowners insurance policies in California, according to the state Department of Insurance. Commercial property insurance rates have doubled, tripled, and in some cases, increased by up to 400%, as reported by The Orange County Register. These challenges are significantly reshaping business landscapes
“Insurance is a cost of doing business, and as insurance costs rise, businesses have to decide whether to make cuts in other areas or to increase prices to maintain profit levels and keep expenses manageable,” explained Nick Schacht, chief commercial officer at SHRM. A recent SHRM report showed that nearly half of CHROs (45%) said rising operational costs were a challenge for their organization in 2024.
“Rising insurance costs may have an outsized impact, compared to other types of operations costs, when it comes to recruitment, retention, and other workforce issues,” said James Atkinson, vice president of thought leadership at SHRM. Higher costs can affect an employer’s ability to offer competitive employment packages. In disaster-prone areas, they may even hinder an employer’s ability to attract top talent due to increasing costs of living.
How the Insurance Crisis Affects Business
The growing insurance crisis is forcing businesses to make difficult financial decisions. State Farm General Insurance Company, which insures 2.8 million properties in California, requested an interim rate increase that would include a 22% average increase for homeowners. When the California insurance commissioner denied the request, State Farm said it “must seriously consider its options within the California insurance market going forward.” The company estimates its direct losses from the Los Angeles fires at $7.6 billion.
Insurers are increasingly limiting new policies or withdrawing from California due to more frequent claims and risk exposure. This shift highlights a broader trend affecting businesses nationwide. Rising premiums, insurer withdrawals, and heightened risk assessments are creating significant hurdles for companies operating in or near disaster-prone areas.
For example, Kerbey Lane Cafe, a Texas restaurant group based in Austin, about 165 miles from Houston and farther from the Gulf Coast, has experienced increasing insurance costs. After Hurricane Harvey caused catastrophic flooding in Houston in 2017, the company saw rising costs each year, including a 10% property insurance increase last year, according to CHRO Rose Ann Garza.
“Ten years ago, we wouldn’t have considered property insurance increases as a big risk to our business,” Garza said. “But the rising costs now cut into our margins. When you have catastrophic consequences, you might see insurance rate hikes double or triple. It’s hard to plan for that. It leads to smaller profit margins, and it can be harder to provide adequate compensation for our team members.”
As businesses grapple with increasing insurance costs, the workforce can be viewed as an area to cut expenses.
“Cutting jobs is often considered the easiest thing employers can do in the short term because it’s more difficult to reduce fixed costs like facilities,” Schacht said. “Employers may also look at whether they could relocate to another area and save costs on insurance, but that can also have an impact on employees and their commute.”
Recruitment and Talent Retention Challenges
Property insurance costs aren’t just concerning to employers; they also matter to job seekers and employees.
“Employees want to feel like their employer is stable and secure,” Schacht said. “If an employer is unable to be insured, that’s a difficult problem. After the next crisis, they may not be around anymore. That reality erodes employees’ trust.”
Quality of life has always been important for employees and job seekers, and that includes the ability to afford to live comfortably. The rising cost of property insurance is making that more difficult in some areas.
For example, 95% of homeowners in California have seen their homeowners insurance premiums increase over the past two years, and 15% have seen their monthly housing costs rise more than 30%, three times the national average, according to the Maxwell 2025 Homeowners Insurance Study. Nationally, 57% of responding homeowners said they may consider or would strongly consider selling their homes or moving if rates continue to rise.
Norton Insurance has operated in Destin, Fla., for more than 40 years, but the past five years of hurricanes in the area have led to unprecedented changes, according to company President Daniel Jones.
“As home insurance rates outpaced inflation and even wage growth, it has made it too expensive for some of our employees to own a home in the same town as our business,” Jones said. “We also insure many of the coastal businesses and have watched many of them close their doors due to increased insurance premiums.”
In addition to affecting current employees, the rising costs also dampen recruitment efforts.
“People are not moving to our area as quickly due to the costs of having insurance, leading to a diminished talent pool for recruiting qualified candidates,” said Dana Mullins, president of the HR Florida State Council (a SHRM affiliate). “The lack of a state income tax was always a big draw for relocating candidates to Florida, and now the rising insurance costs may outweigh the benefits.”
Addressing the Challenges
Faced with rising insurance costs and increasingly severe natural disasters, employers in disaster-prone areas are devising strategies for how to best manage the resulting workforce issues. When calamity hits, employers need to overcome short-term, immediate challenges, and they also need to develop long-term strategies, Atkinson said.
To deal effectively with the immediate workforce challenges brought on by disaster, it’s important to be prepared with disaster plans for employee safety and business continuity.
“Also, ensure your overall investment in employee well-being is sufficient,” Atkinson said. “Even if you’re not in an area that is prone to disasters, they’re becoming more common. Make sure you’re investing in mental health support and well-being to be prepared just in case.”
In the immediate aftermath of a disaster, some businesses may have to suspend operations. Service businesses may be able to maintain operations by finding a temporary location or allowing employees to work remotely, Schacht said.
“Some businesses trim back their offerings to only provide core services while getting back on track, and may find partner organizations that can cover some of the work their own employees would normally do,” he said. “It’s important to continue to support your employees while still serving customers.”
For the long term, employers are developing creative and proactive strategies to attract and keep top employees despite cost pressures. Some are offering relocation assistance or housing stipends to entice employees to locate in their areas, and others are finding ways to keep current employees satisfied.
In Texas, Kerbey Lane Cafe has paid attention to the perks its employees prioritize.
“We might think everyone wants a gym membership, but we’ve realized that our employees care more about free food,” Garza said. “We’re a restaurant group, so that’s easy for us. Each employee gets an allowance of how much food they can take home to their families or roommates, and that’s a benefit that matters to them.”
In Florida, “many businesses have transitioned to a more remote or fully remote workforce to maintain the quality of talent in their organizations,” Mullins said. “As people decide to leave our state, employers are looking for ways to retain top performers by converting their role to a remote position.”
Embracing remote work has been helpful for Norton Insurance. When the local area became too expensive for many employees to live in, “we opened the idea to remote work to retain their talent, and they have been able to move to more affordable areas,” Jones said. “The employees who work in our main locations have had salary increases between 10% and 20% to offset their increased cost of living.”
The ability to work remotely has also provided a greater pool of potential employees for Norton Insurance.
“We are happy that our capabilities to work from home have reached a point where we can hire the best candidate instead of the most convenient candidate,” Jones said.
Offering remote work is just one of several talent attraction strategies for businesses impacted by natural disasters and high insurance rates. For some businesses, relocating makes sense.
“Make sure you’re expanding your talent pool and avoid limiting yourself geographically or from nontraditional sources,” Atkinson said. “There are many untapped talent pools with a lot of skill sets to offer who may not have been heavily recruited, such as people with disabilities, veterans, and military spouses, so ensure you’re thinking about the skills you need to have access to the widest talent pool.”
Finally, it’s important to plan strategically for workforce resilience through cost management and advocacy. For example, Kerbey Lane Cafe’s commercial insurance provider first notified the company that its commercial property insurance would increase by 25% last year. However, Garza was able to negotiate the increase down to 10% due to a longstanding relationship with the carrier and the ability to point out the company’s proactive risk control measures, she said.
Along with controlling insurance costs as much as possible, Garza partners with Kerbey Lane Cafe’s finance department to make informed workforce decisions. “It’s really important to work closely with your CFO and accounting team and have open, honest communications about what you can afford as you plan for workforce needs,” she said. “Natural disasters are increasing, so this issue isn’t going away.”
Building Workforce Resilience amid Rising Risks
As insurance costs surge and disaster risks grow, businesses must adapt their workforce strategies to remain competitive. Expanding remote work, offering relocation support, and tapping into new talent pools can help mitigate the impact. However, short-term adjustments alone won’t be enough to sustain long-term growth.
Organizations must take a proactive approach to risk management by reassessing financial strategies, strengthening business continuity plans, and fostering workplace flexibility. Collaboration across industries will be essential to developing innovative insurance solutions and investing in resilience. By planning strategically and embracing adaptability, companies can protect their workforce, maintain stability, and ensure they remain strong in an evolving risk landscape.
