Rising costs from climate change is driving insurers out of New York

On a brisk Saturday morning in early November, New Yorkers who lived in the blocks surrounding Prospect Park woke up to the lingering smell of smoke.

A brushfire ignited in the Nethermead, a wooded area in the middle of the park, around 6:40 p.m. on Nov. 8 and burned for more than three hours before firefighters brought the two-acre blaze under control. It will take years for vegetation to recover and wildlife to return to the area.

New York isn’t known for the type of wildfires that afflict the parched forests of the West, but the region was in the midst of a historically severe drought. Only 1.59 inches of rain fell on Central Park in September and October, one of the city’s driest autumns on record, prompting Gov. Kathy Hochul to declare a drought warning for much of downstate and New York City Mayor Eric Adams to ask New Yorkers to conserve water.

“It’s hard to believe that we’d be talking about brushfires and droughts in New York City,” Adams said at a Nov. 18 press briefing. “Our reservoirs are nowhere near where they should be, and our city and watershed continues to experience significant precipitation shortages.”

It likely won’t be the last. Storms are becoming more intense, unleashing torrents of rainfall across larger swaths of the state and rendering the “100-year flood” meaningless as a term of rarity. Summers are getting hotter and heat waves are lasting longer, straining the state’s resources. Wildfires in Canada burned so strongly in 2023 that its smoke turned the city’s skyline orange, forcing people to retreat indoors. New York City appears to be sinking too, making its vast coastline particularly vulnerable to floods from sea level rise and storm surges.

On top of that, the city could institute the same type of mandatory restrictions that water-scarce regions in Arizona and California deploy if its droughts become more severe.

“We never expected drought to be a problem in New York state,” said Assembly Member David Weprin of Queens, who dealt with two brushfires in two parks in his district this fall. “Fires are something that we never expected to happen in Queens in these parks, and it’s something we’re going to pay attention to.”

Public officials aren’t the only ones grappling with the growing list of extreme weather conditions. Each catastrophic event forces the insurance industry to reexamine where it will provide coverage and adjust its rates, or, in some instances, pull out of a market entirely. 

Several coastal states are early indicators of the financial pressures New Yorkers will likely experience in the near future as superstorms, flooding, and brushfires affect the Northeast. 

The cost of property insurance in New York can vary widely, but premiums have risen 19% since 2018, including a 6.4% spike in 2023. Nearly half a million New York homeowners, or about 5%, decided to forgo carrying property insurance due to its expense.

But the situation is far worse in Florida where 16 major storms have caused up to $200 billion in losses since 2020 and contributed to home insurance rates four times the national average. Premiums in Florida have risen 7% this year to a nation-leading average of $11,759 – if homeowners even qualify. Nearly 1 in 6 homeowners in Florida don’t have meaningful property insurance because it’s too expensive or insurers simply won’t provide coverage in areas rebuilding from hurricane destruction.

California homeowners are in a similar predicament. Even though premiums are well below Florida’s, property insurance rates soared 16% over the past five years, after wildfires and flooding inflicted $20 billion to $50 billion in damages.

Some insurers are already calling it quits. Florida-based United Property & Casualty Insurance Co. announced plans to withdraw from New York in August 2022 and was put into receivership the following year after mounting losses from Hurricane Ian caused the company to become insolvent.

This year, Adirondack Insurance Exchange and its subsidiary Mountain Valley Indemnity Co. announced they would leave New York state after experiencing a $32.5 million loss in 2023. The Williamsville-based company, which had a reputation for providing among the state’s least expensive policies, saw its policyholder surplus shrink from $82 million in 2021 to only $20 million last year as reinsurance costs and claims expenses both rose.

Their exits have exasperated homeowners as far away as Long Island, where premiums are among the highest in the state. One property owner in the South Fork, a low-lying wealthy enclave surrounded by ocean, saw his annual policy skyrocket from $3,500 to more than $14,000 a year before finding another policy for $8,000, according to the East Hampton Star. Others have grappled with separate deductibles specifically for hurricane damage that start at 5% of what their home is insured, which means they would pay $50,000 if it would cost $1 million to reconstruct their house.

Single-family homeowners aren’t the only ones facing rising costs. Owners of multifamily apartment buildings, co-ops and condos in New York City are seeing their insurance rates jump from 10% to 300%, depending on their history of claims. Between 2020 and 2023, average premiums doubled for Brooklyn apartment buildings with at least 50 units, and rose more than 50% in Manhattan and Queens, The City reported. That’s higher than the national average.

Lawmakers worry that the steady rise in premiums will price people out of the market.

“We’re concerned that we have strong antidiscrimination requirements for insurance to include climate risk and we want to see the state start to study and report on the impact of climate change and identify communities that need additional protection against climate change,” Manhattan state Sen. Brad Hoylman-Sigal told City & State.

State Sen. Neil Breslin, who has led the state Senate Insurance Committee, urged insurers to work together and remain in markets vulnerable to climate change. He brought several insurance companies to Long Island about 15 years ago to convince them to spread the risk among other carriers, but it was unsuccessful.

“Some companies had a disproportionate number of people, and we tried to come to some accommodation where the risk would be spread and it would not hit companies proportionally,” he said. “It was crisis intervention at that time.”

When Superstorm Sandy struck in 2012, it left a $82 billion path of destruction. The number of National Flood Insurance Program policies in New York has remained flat, at about 169,000, but some insurers left the South Shore of Long Island for good. (In places like Long Beach, 90% of properties are at risk of flooding, according to a Federal Reserve Bank of New York report.)

And it will only get more expensive to rebuild after a natural disaster. The market-rate value of New York City properties in the floodplain has already risen 44% since Superstorm Sandy to $176 billion, according to a 2022 city comptroller report. By 2050, coastal flooding and more frequent storms would put $242 billion at risk, the report said.

Breslin didn’t blame insurance companies for reevaluating their stake in New York’s insurance market after successive hurricanes.

“If you don’t know when that 100-year storm is going to come, maybe you’ll decide you won’t insure that area,” Breslin said. “If someone buys a house and they have a mortgage, their bank is going to read about storms happening across the state and require them to have insurance against flooding and that creates an expense. It becomes a public problem.”

There aren’t easy solutions. The New York Property Insurance Underwriters Association provides a basic level of property insurance for those who can’t obtain one on the open market. But their maximum claim for rebuilding a home is $600,000, which is about the average value of a home in Suffolk County.

The state Department of Financial Services, which regulates insurers operating in New York, protects against discrimination and geographic redlining. But there’s no law requiring insurers to disclose the rates paid by individual property owners. And insurance companies don’t collect data on practices for affordable housing properties or issue policies specifically tailored to affordable or market-rate housing.

In order to get more data, Weprin proposed that the state Department of Financial Services study the increase of insurance premiums and the lack of coverage in certain areas affected by flooding as well as the likelihood of establishing a private flood insurance market. The bill passed both houses of the Legislature, but it was vetoed by the governor.

Another measure, which has not gone through committee, would help those living near the shoreline of several upstate bodies of water, including the St. Lawrence River, Lake Erie and Lake Ontario, obtain homeowners insurance.

“The St. Lawrence River and Lake Ontario on my side of my district have been very calm lately, but a few years ago there was an issue,” said Assembly Member Ken Blankenbush of the North Country. “There was high rising water that took out a lot of decks and docks in Clayton and the Alexandra Bay area.”

Congress has also tried to tackle the runaway costs of property and flood insurance. In October, New Jersey Rep. Josh Gottheimer and Long Island Rep. Andrew Garbarino proposed a $1,000 tax credit to help homeowners earning under $200,000 annually afford their flood insurance premiums. And Brooklyn Rep. Nydia Velázquez introduced legislation that would fix how the National Flood Insurance Program processes claims and adds guardrails to reduce fraud. She also wants the Federal Emergency Management Agency and the U.S. Army Corps of Engineers to invest more in projects that would reduce the harm that natural disasters cause underserved communities.

“Insurance is all about risk,” Velázquez said. “If the federal government can invest in these projects and programs and better protect our communities from the hurricanes, floods, and wildfires in the West before they strike, insurance markets will accordingly adjust.”

Insurance companies must make adjustments too. The Columbia University Sabin Center for Climate Change Law developed a toolkit for insurers and regulators to model the risks of climate change more accurately. “By evaluating, quantifying, and mitigating climate litigation risk, the insurance industry can begin to protect itself, and in turn our society, from the growing harms of climate change,” according to the Sabin Center report.

Breslin, who is retiring from government at the end of the year, wants the Legislature to hold a public hearing with multiple state agencies, developers and insurers to hash out how the industry can remain viable in New York.

But Breslin also wants developers and local governments to reconsider investing in areas that are likely to flood during an extreme weather event, even though those lots might be less expensive to build.

“If there’s a project and the government is going to invest millions of dollars, they have the ability to say, ‘We want a review of the floodplain data and an analysis of the projections.’ I don’t see a lot of that going on,” he said. “There should be more people in government who say, ‘Don’t have federally subsidized development in this location because I’m seeing data that it will make it harmful to residents and the project.’”