Insurance premiums could rise as more extreme storms hit coastal markets

Influx of capital in insurance market has helped keep premiums artificially low

National /
Mar.March 26, 2019 12:30 PM

Marathon, Florida after Hurricane Irma hit the Florida Keys (Credit: Getty Images and iStock)

It’s no secret that coastal homes are becoming more vulnerable to extreme weather and other effects of climate change. But the cost of living on the coast has remained relatively stable in waterfront areas of Miami Beach and the Northeast.

That’s partly due to an influx of capital in the insurance industry that has increased competition and kept premiums artificially low, Bloomberg reported. At the same time, homeowners in areas of the U.S. that will not experience flooding are subsidizing those who do live in flood zones through the national flood insurance program. Those premiums increased by 8 percent in April 2018 to $935 per policy on average.

Meanwhile, residential prices and sales in coastal markets in the U.S. are on the rise. In Miami Beach, luxury home sales increased more than 60 percent year-over-year in the fourth quarter of last year. Home sales in Nantucket, a small island off Cape Cod, Massachusetts, rose 161 percent in 2018 compared to the previous year. And in the barrier islands off the coast of North Carolina, the average sale price rose 11.5 percent over the last three years, according to Bloomberg.

A recent study by the U.S. Geological Survey found that around half a million California residents and $150 billion in coastal real estate are at risk of flooding by the end of the century.

Premiums could rise as more extreme storms hit vulnerable markets and insurance companies update their climate models. “With the greater frequency and severity of storms, will it be more expensive going forward to live in coastal areas?” Howard Mills, global insurance regulatory leader at Deloitte, told Bloomberg. “Yes. And frankly, it should be.” [Bloomberg]Katherine Kallergis


Related Articles

arrow_forward_ios
(Photo Illustration by The Real Deal with Getty Images)
After Ian: South Florida’s construction costs, insurance to rise
After Ian: South Florida’s construction costs, insurance to rise
(Illustration by The Real Deal with Getty)
Insured losses from Hurricane Ian could reach $40B
Insured losses from Hurricane Ian could reach $40B
(Photos via Getty Images)
Hurricane Ian makes landfall in southwest Florida: Photos
Hurricane Ian makes landfall in southwest Florida: Photos
From left: Sotheby’s Daniel de la Vega and Reagan Jefferies with Brevard County
One Sotheby’s picks up Brevard County brokerage
One Sotheby’s picks up Brevard County brokerage
10181 US Highway 98 West and 39 Sandy Dunes Circle (LoopNet)
Florida Panhandle estate sold for $25M
Florida Panhandle estate sold for $25M
Netscape co-founder Jim Clark and 2000 South Ocean Boulevard in Manalapan (Getty, Sotheby's)
Manalapan compound poised to sell for Florida-record $175M
Manalapan compound poised to sell for Florida-record $175M
The lot where the Champlain Towers South once stood with Terra's David Martin, John Moriarty & Associates president John Moriarty, Davide Bizzi of Bizzi & Partners (Terra, Moriarty & Associates, Getty, RisMedia)
$1B Surfside settlement signals condo association, construction insurance premium hikes
$1B Surfside settlement signals condo association, construction insurance premium hikes
5050 Northwest Seventh Street in Miami (Google Maps, iStock)
Condo insurers exit market and hike rates after lawmakers fail to pass safety reform
Condo insurers exit market and hike rates after lawmakers fail to pass safety reform
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...