The U.S. Insurance Crisis: Climate Change, Property Devaluation, and Uninsurable Homes
The United States insurance landscape is undergoing a profound transformation, and for many homeowners and businesses this is happening right now. The ability to secure and afford coverage is diminishing in many regions, according to data released March 8, 2025.
Climate change is the primary driver. Since 2017, a surge in extreme weather events—including wildfires, devastating hurricanes, inland flooding, and derechos—has disrupted traditional risk models. Insurers are struggling to accurately price the risk, as catastrophic losses occur with increasing frequency and severity. “Once-in-a-century” events are now happening every few years.
This is already playing out in states like Florida, where stronger and more frequent hurricanes have caused numerous insurers to withdraw. Many homeowners have seen their policies canceled or premiums skyrocket, sometimes even exceeding their mortgage payments. Florida’s state-backed insurer of last resort, Citizens Property Insurance, has grown to cover 1.4 million policies as private carriers retreat. Even Citizens is exploring options to reduce its exposure, yet the private market is reluctant to take on these high-risk properties.
California faces a similar crisis. Destructive wildfires, often ignited by failing utility infrastructure, have made large areas of the state uninsurable. Major insurers, such as State Farm and Allstate, have ceased issuing new policies in high-risk areas after record-breaking wildfire payouts in 2017 and 2018. The FAIR Plan, California’s insurer of last resort, is now facing a burden it was never designed to handle. Home sales in fire-prone regions are stagnating, and property values are declining by 20-40%.
Other states, including Louisiana, South Carolina, Texas, and parts of New England, are also grappling with rising insurance turmoil. The costs of reinsurance, which insurers purchase for their own protection, have jumped by nearly 40% in the U.S., forcing companies to pass these costs onto homeowners. For those who can’t afford the increased premiums, policies are simply dropped, leaving them unprotected.
State-backed insurers of last resort have emerged as a safety net, but they are themselves at risk of financial collapse. These insurers were designed for temporary coverage, not as primary providers. However, with private insurers withdrawing, they are becoming the only option for many homeowners. They are now carrying liabilities that vastly exceed their original purpose.
If a catastrophic event overwhelms these insurers, the burden will likely fall on taxpayers. State governments may need emergency insurance levies, affecting homeowners regardless of their location.
Enter FEMA, which manages disaster relief and runs the National Flood Insurance Program (NFIP). The NFIP is $20 billion in debt. Reforms have increased premiums in high-risk areas, but the underlying problem remains: flood risk is accelerating, with claims costs surpassing premiums. The program could collapse without significant intervention.
Adding a political element, the Trump administration has expressed intentions to reduce FEMA’s funding and shift disaster response responsibilities to the states. The “Project 2025” agenda proposes phasing out the NFIP entirely, leaving flood-prone homeowners to the private market—a market that has demonstrated little interest in this risk.
The implications of these trends are significant. If FEMA is defunded or the NFIP is dismantled, millions of homeowners may have no viable insurance options, increasing the potential for economic catastrophe.
The early warning signs are visible in housing markets. In many high-risk areas, insurance costs are driving down home values. Buyers are backing out of deals due to the high cost of insurance. In some Florida and California counties, home values have dropped by up to 40% in the most extreme cases. Mortgage lenders are issuing warnings, as they won’t provide loans without insurance.
Cash buyers, often investors, are purchasing properties at bargain prices. This is rapidly gentrifying at-risk regions. The result is a widening gap between those who can afford to self-insure and those forced to abandon homeownership.
The political divide is evident in state responses. Conservative states are pursuing deregulation and incentives to attract insurers, while Democratic strongholds are taking a more interventionist approach. County-level differences also exist. Red counties in hurricane- and tornado-prone regions are feeling the effects of rising premiums, while blue counties in wildfire-prone areas face similar issues.
The insurance crisis underscores the need for climate adaptation. Cities and states that take proactive measures, like reinforcing infrastructure and implementing stricter building codes, will be best positioned to attract investment and maintain property values. For the rest, the retreat has begun. Sadly, it is shaping up to be an unplanned retreat, as noted by Michael Barnard.
America is turning its back on both the reality of climate change and helping its most at-risk citizens, and the future looks bleak for some.
