US Home Insurance Needs Climate Risk Adjustments, Says Swiss Re Chair

The US home insurance market is experiencing significant premium increases, yet according to Jacques de Vaucleroy, chairman of Swiss Re, these hikes still fall short of addressing the true climate risks. During a recent interview, de Vaucleroy highlighted that homes continue to be built in high-risk areas, often grandly, despite the rising insurance premiums.

A Rising Tide of Risk

De Vaucleroy pointed out that while premiums have increased, they remain insufficient to dissuade construction in risky zones. This impacts homeowners nationwide, particularly in climate-vulnerable regions like Florida, where premiums have surged past $5,000, leading over a million residents to rely on the state-backed insurer of last resort.

The situation has intensified over the past few years, with notable changes observed between 2020 and 2023.

The Bigger Picture

Understanding these dynamics is crucial for homeowners, policymakers, and insurers. With reinsurers adjusting their pricing models to better reflect climate risks, consumers face increasing premiums. De Vaucleroy suggests that higher insurance costs might ultimately drive more effective mitigation and adaptation strategies.

Recent research indicates that the cost of reinsurance has significantly contributed to rising premiums, accounting for nearly two-thirds of the increase. This adjustment reflects a growing acknowledgment of climate risks among reinsurers.

De Vaucleroy advocates for a shift from reactionary measures to proactive public policies and adaptation strategies, underscoring the need for a collective effort to address the growing climate risks.