NC’s Appeal Trumps Climate Concerns, As Home Insurers Struggle To Manage Risk

By Brianna Kraemer
Carolina Journal

Climate alarmism reports are not stopping people from moving to coastal states like North Carolina, sparking performance volatility for homeowner insurers, a new report finds.

The home insurance segment suffered $15.2 billion in underwriting losses in 2023, more than double those seen in the previous year, according to the AM Best. The report, “Migration to CAT-Prone Areas Adds to US Homeowners Insurers’ Performance Volatility,” points to migration into areas where weather-related events occur more frequently as a factor in the insured loss increase.

California, Florida, Georgia, North Carolina, Texas, and Washington have experienced the majority, 53%, of America’s population growth from 2010 to 2020. A press release states that “all six states are prone to severe weather-related events,” adding that urbanization and rising populations have become particularly problematic in regions susceptible to natural perils.

“A growing population means an even larger rise in real property development and thus in insured values,” said Christopher Graham, senior industry analyst at AM Best. “Construction in catastrophe-prone areas adds to flood risk. It also increases the risk of wildfires in areas prone to them due to human activity, as well as utility companies.”

A growing population is also a sign that North Carolina presents a winsome bunch of reasons to move here than elsewhere, explains Jon Sanders, Director of the Center for Food, Power, and Life at the John Locke Foundation. 

“There is no evidence of greater or worsening severe weather, so it is not even a matter of climate change, let alone whether it is induced by, or can be ameliorated by, things humans do,” Sanders stated. “With respect to fears about severe weather, while insurers may see only one perspective, newcomers are weighing a host of factors and choosing to come here. Who are we to say they’re wrong?”

He pointed to a range of positive circumstances in North Carolina that are drawing people in: our tax climate, business climate, temperate weather, natural environment situated between beaches and mountains, the people and cultures, low crime rates, high opportunities, and room for growth.

Population trends show California is the nation’s biggest loser, with residents moving in waves to Florida, Texas, and North Carolina. While a rising population will put more people in disaster-prone areas, the number of people affected will relate to population changes, not climate change, Sanders said.

Earlier this year,  North Carolina Insurance Commissioner Mike Causey rejected a request from the North Carolina Rate Bureau’s (NCRB) to raise homeowners’ insurance premiums. The Bureau proposed a 42% average rate hike, ranging from as little as a 4% increase in the mountains, to over 99% at the coast.

SEE ALSO: Causey rejects homeowner’s insurance rate hike, hearing set for October

Over 25,000 people from across the state submitted comments, especially from individuals in the coastal regions. Causey noted that almost nobody was in favor of increases while also acknowledging that insurance companies are having a tough time paying out more in claims than they are taking in. 

Insurance fraud was cited as an issue driving up preventable costs. A court hearing on the matter is set for October 7.