Home insurance premiums keep rising, but U.S. legislators are divided over what’s causing the insurance crisis.

Party lines seemed to divide lawmakers at a June U.S. Senate Budget Committee meeting on “how climate is already challenging insurance markets.” Democrats argued climate change is the driving force behind increasing premiums, while Republicans pointed to inflation, rising interest rates, and high government spending.

“More than a year has passed since our hearing on climate havoc in the insurance industry upending housing markets, mortgage markets, and local property tax bases, and spilling out into the broader economy,” committee chair Sen. Sheldon Whitehouse (D-Rhode Island) said. “That threat is just one of the systemic risks climate change poses to our economy and to our financial system.”

“Yet even with interest on our national debt … the majority refuses to write a budget or work together to curb reckless Washington spending,” ranking member Sen. Chuck Grassley (R-Iowa) responded in his comments. “This week is more of the same, with our 19th hearing on climate change.”

Home insurance rates have increased by 20% in the last two years, according to Insurify’s home insurance report, and Insurify projects another 6% increase in 2024. Disaster-prone areas, like coastal Florida, Louisiana, and Texas, as well as parts of California and Ohio, face higher premiums.

Florida draws plenty of interest

The Sunshine State has the highest home insurance premiums in the country, according to Insurify data, at an average of $10,996 per year, nearly five times the national average of $2,377.

Whitehouse called out Florida’s high premiums and homeowners’ increasing reliance on the state’s insurer of last resort, Citizens Property Insurance Company.

“In 2022 and 2023, more than a dozen insurance companies left Florida’s residential market … and [residents] fled to Citizens, which ballooned from a 4% market share to 17% last year,” he said. “If it has to pay out claims that exceed its reserves, Citizens can levy a surcharge on Florida insurance policyholders across the state. Good luck with that.”

Rade Musulin, a principal actuary at Finity Consulting, said Florida shows how significantly severe weather can impact the insurance market.

“In coming decades, we must prepare for the possibility of more extensive or extreme hurricanes and coastal flooding from Texas to New England,” he said. “Florida’s experience is a warning of what we may see in the future in other states.”

Divided on causes and solutions

Grassley said if the federal government is going to remain ready to respond to “natural disasters and national emergencies,” it has to be able to do that.

“That begs to put the nation’s fiscal health in order,” he said.

Grassley credited recent high interest rates for making mortgages unaffordable, not climate change, and blamed “expensive liberal policies.”

“Insurance premiums are far too high across the board and may increase after the recent storms, including those very storms in my state of Iowa,” he said. “Climate change isn’t the primary driver of insurance rate hikes, and collapse of the insurance industry isn’t imminent, although, I have to say, Iowa had six property and casualty companies pull out of insuring Iowans.”

Several times, Whitehouse shared his concern that elements of the insurance crisis could indicate another meltdown like the economy experienced in 2008.

“This isn’t all that complicated: climate risk makes things uninsurable. No insurance makes things unmortgageable. No mortgages crashes the property markets. Crashed property markets trash the economy,” he said. “It all begins with climate risk, and a major party pretending that climate risk isn’t real imperils our federal budget and millions of Americans all across the country.”

What’s next: More extreme weather across more states

Florida isn’t alone. A May New York Times investigation found insurers in 18 states lost money on home coverage in 2023, including states less commonly making headlines for insurance crises, like Illinois, Michigan, Utah, Washington, and Iowa.

“This is a signal that hurricanes and earthquakes — once the most prevalent perils — are being rivaled by hail, windstorms, and wildfires,” said Whitehouse.

In 2023, there were 28 separate billion-dollar extreme weather events, according to the National Oceanic and Atmospheric Administration (NOAA). It also predicts an 85% chance of an above-average 2024 hurricane season, with up to 25 named storms and up to seven major hurricanes.