Climate Change and the Insurance Markets
Since 2020, we’ve been discussing what we call The Great Repricing: the gap between the physical risk from climate change and the time it takes for the markets to price in this risk.
As climate-related disasters increasingly inflict significant losses, insurance companies continue to face challenges in providing affordable coverage. In 2021, the rise in climate-related disasters led to $145 billion in damages and resulted in higher home insurance premiums for 90% of homeowners.1
The devastating wildfires in California have led to premium hikes, tougher eligibility requirements, and have now compelled insurance giants Allstate and State Farm to pull out of the California Homeowners Insurance Market.
The annual cost of U.S. flood damage has more than quadrupled since the 1980s,2 and this will only grow given climate-driven extreme rain, more intense hurricanes, and rising seas. Many local governments have expressed concern that helping people relocate could decimate their tax bases.
See what Jeff had to say about all of this in this recent interview:
Since 2020, we have been sharing our understanding of the potential impact of these climate trends, and incorporating a variety of investment metrics, including climate repricing risk, into our model portfolio construction process. Learn more about our Climate Unified Managed Accounts today.
And for more information about The Great Repricing, download our white paper and watch Jeff’s TV show on Fintech.tv.
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