After major providers quit California, Florida, and Louisiana, insurers are starting to pull back in other U.S. states, leaving homeowners struggling to find affordable cover for the risk of being hit by floods, wildfires or hurricanes.
Insurers are retreating from markets in hurricane-prone North Carolina and western states like Oregon, Colorado, and Arizona that have struggled with increasingly frequent and destructive wildfires in recent years.
Insurance firm Nationwide last year did not renew around 10,000 policies in parts of North Carolina due in part to risks posed by climate change and hurricanes.
"Insurance companies are having to make big payouts because of all these storms," said Kemp Burdette of Cape Fear River Watch, an advocacy group in Wilmington that has raised concerns about development in climate-risky areas.
"And so they're raising rates and they're pulling out of North Carolina because it's a losing proposition on the coast."
Nationwide has also limited its offering in Oregon, where brokers say it is difficult to get other major companies to underwrite policies in areas where wildfires have become more frequent.
The insurance industry is already reeling from a string of billion-dollar disasters, and the crisis could get worse, researchers and activists warn, as climate change fuels stronger storms and hotter, drier conditions that can spark out-of-control fires.
Arizona, Nevada and Washington have also seen a recent spate of non-renewal notices and premium hikes amid major wildfires.
"You can't just draw a line around a state and say, 'well, California is having these problems so it won't affect Nevada or Arizona or Oregon'," said Michael DeLong, a research and advocacy associate with the Consumer Federation of America, a nonprofit group.
There were a record 28 weather and climate disasters costing at least $1 billion each in the U.S. last year, with a collective price tag of about $94 billion, according to the National Oceanic and Atmospheric Administration.
Industry experts say that while full-blown insurance company exits from states like North Carolina haven't occurred yet, Nationwide's decision on non-renewals is a clear sign that insurers are increasingly wary of the risk of extreme weather.
"It's both Carolinas, it's Virginia and we're seeing more and more of those decisions being made in areas where there are high risks," said Mark Friedlander, corporate communications director with the Insurance Information Institute, an industry research group.
"It is (making) it challenging for many homeowners in certain states to find affordable private insurance coverage."
Fluctuating costs
In North Carolina, the state's rate bureau proposed an average increase of 42% in homeowners insurance rates this year - with a high of 99% in some areas - but this was rejected by Insurance Commissioner Mike Causey, who described the proposed increase as "excessive and unfairly discriminatory".
As they wait for officials to agree on a rate increase, those who are able to find insurance are already feeling the pinch.
Terry Bragg, executive director of the historic Battleship North Carolina, which is moored across from downtown Wilmington, estimated that the total cost of wind insurance on his home – a supplement to standard homeowners insurance – is now more than $6,600.
Bragg, who stressed he was speaking in his personal capacity and not in his role with the battleship, had an annual wind premium of roughly half that a decade ago.
Miyuki Hino, an assistant professor at the University of North Carolina who has researched state efforts to buy back homes in flood-prone areas, buys flood insurance even though she doesn't live in a floodplain as risks rise beyond officially designated areas.
She noted that premiums can change, seemingly, without rhyme or reason.
"Both home and flood insurance are sold on a one-year basis, and you don't really have any foresight about how that cost might change in the future when you buy it," she said.
"In the past three or four years, I've had (flood insurance) go up, then I've had it go down 25%, and then back up about 10% - I've had it change for reasons that are totally beyond me," said Hino, whose overall flood insurance costs have gone up slightly over that time.
Insurers don't have to make major announcements - like State Farm did when it stopped selling new homeowners policies in California, for example - before scaling back operations, said David Marlett, a professor of risk management at Appalachian State University in North Carolina.
"They can just sort of quietly be more selective in their underwriting or find ways to non-renew because they don't like your roof or something," he said, naming North Carolina and wildfire-prone Colorado as the next potential insurance problem spots.
As of May 2024, the average annual premium for a home with a dwelling coverage amount of $300,000 was $2,535 in North Carolina and $2,988 in Colorado - well above the national average of $2,151 per year, according to the personal finance website bankrate.com.
'Insurers of last resort'
Industry experts say insurance companies might not pull out of other states entirely but predicted that state authorities might have to increasingly step in to offer cover for natural disasters.
"They're not leaving these states by any means, but they're non-renewing," Friedlander said. "Most likely, we're going to see continued growth in state backstop insurers in many states where there are (volatile) conditions right now."
In Colorado, state lawmakers last year set up a state-backed "insurer of last resort" intended to take on policies and customers deemed too high-risk for the private market.
Versions of this kind of state backstop exist in more than two dozen states, including Florida and Louisiana.
The insurance crisis is also partly being driven by inflation, which is increasing the rebuilding costs for homes hit by disasters, as well as the increased cost of reinsurance – essentially insurance for insurance companies.
Burdette of Cape Fear River Watch in Wilmington said development in risky areas is contributing to the price and availability squeeze in the insurance market.
"So you're going to have one, two insurance companies left so you're not going to have any choice and so rates will inevitably go up," he said.
"Or these companies that aren't making good business decisions about leaving a market that is a sinking ship, they'll go out of business and then there won't be any more insurance. And then where will we be?"
