Based on the Treasury, house insurance coverage prices are rising because of rising local weather occasions

Firefighters battle flames during the Eaton Fire in Pasadena, California, USA, January 7, 2025.

Mario Anzuoni | Reuters

Climate-related natural disasters are driving up insurance costs for homeowners in the hardest-hit regions, according to a Treasury Department report released Thursday.

In an extensive study covering the period 2018-2022 and including some data beyond that, the ministry found that there were 84 disasters costing $1 billion or more (excluding floods) and that they caused a total of $1 billion in damages of 609 billion US dollars. Flooding is not covered by homeowners insurance.

During the period, the cost of policies across all categories rose 8.7% faster than the rate of inflation. However, the burden has largely fallen on those living in areas most affected by climate-related events.

For consumers living in the 20% of ZIP codes with the highest expected annual losses, premiums averaged $2,321, or 82% more, than for consumers living in the 20% of ZIP codes with the lowest risk.

“Homeowners insurance is becoming more expensive and less accessible to consumers as the costs of climate-related events pose growing challenges for both homeowners and insurers,” said Nellie Liang, Treasury Undersecretary for Domestic Finance.

The report comes as emergency responders continue to battle raging wildfires in the Los Angeles area. At least 25 people were killed and 180,000 homeowners were displaced.

Treasury Secretary Janet Yellen said the cost of the fires was still unknown, but noted that the report reflected an ongoing serious problem. In the period examined, almost twice as many disasters per year due to climate-related events were reported than in the period 1960-2010 combined.

“Besides that [wildfire disaster] “This is not sole evidence of these impacts, as other climate-related events pose challenges for Americans to find affordable insurance coverage – from severe storms in the Great Plans to hurricanes in the Southeast,” Yellen said in a statement. “This report identifies alarming trends of rising insurance costs, all of which threaten the long-term prosperity of American families.”

Both homeowners and insurers in the hardest-hit areas also paid in other ways.

Non-renewal rates in the highest-risk areas were about 80% higher than in the lower-risk areas, while insurers in higher-risk areas paid average claims of $24,000, compared to $19,000 in regions with the highest risk lowest risk.

In the Southeast, which includes states like Florida and Louisiana that are frequently hit by hurricanes, loss frequency was 20% higher than the national average.

In the Southwest, which includes California, wildfires ravaged 3.3 million acres during the period, with five events causing more than $100 million in damage. The average damages claim was nearly $27,000, almost 50% higher than the national average. Insurance non-renewal rates were 23.5% higher than the national average.

The Treasury released its findings when the current government had just three days left in power. Treasury officials said they hope the administration of President-elect Donald Trump will use the report as a starting point for action.

“We certainly hope that our successors continue to focus on this issue and continue to conduct important research on this topic and think about important and creative ways to address it,” an official said.