Home insurance premiums have risen rapidly over the last few years, fueled by the increase in billion-dollar weather disasters. And it’s not over yet, says a new analysis from climate risk analysis firm First Street, which predicts that some cities in the most disaster-prone areas will be seeing significant additional premium increases between now and 2055 due to the risk of climate-related disasters.
Per the analysis, the city with the greatest increase in insurance premiums in the next 30 years will be Miami, skyrocketing a whopping 322% from current levels due to the rising risks of hurricanes. That same storm risk will also cause huge insurance premium jumps for Jacksonville (226%), Tampa (213%), and New Orleans (196%), whereas wildfires caused Sacramento to land at the fifth highest insurance increase (137%).
“Over the next 30 years, we’re likely to see more hurricanes move into the mid-Atlantic and move farther northward, and that’s going to cause additional increases in cost and insurance in that space,” said Jeremy Porter, Head of Climate Implications Research for First Street.
That said, even at current risk levels for weather disasters, Porter notes that many home insurance policies are underpriced relative to risk due to state regulations on rate hikes. That’s a dynamic that has driven deep losses for carriers in recent years.
“So taken together, we have sort of the recipe here, where insurance is increasing,” he says.
Nationally, First Street estimates that free-market, risk-based pricing would drive a 29.4% increase in average home insurance premiums by 2055. That figure includes an 18.4% correction for current underpricing and an 11% increase from growing climate risks.
Those projections cover only the rising cost of traditional homeowners insurance for wind, hail, and fire damage. They do not include the rising price of flood insurance, and are not adjusted for inflation.
Typically, flood insurance is required only for homes in areas that are at a higher risk of flooding. For those homes, flood insurance premiums may also increase steeply in the coming years.
Nationally, flood damages are estimated to increase by an average of 28% by 2055, per First Street’s flood model, with flood damages in some areas expected to surge much higher. The worst hit metros are predicted to be New Orleans (at a staggering 533% increase), Atlantic City (296%), and Fort Lauderdale (122%).
“We’re getting to the point to where we can start to understand, at least from a climate component, what the additional cost of insurance is going to be,” says Porter.
“There will be other indicators that may also drive up insurance. But if we just isolate the climate component, we’re able to understand how much more important climate is going to be in terms of pricing damages into the future,” he adds.
Why Premiums Are Rising
In recent years, home insurance companies have struggled to keep pace with the mounting losses from major disasters, including hurricanes and wildfires. There were 27 confirmed weather or climate disaster events in 2024 alone, each with losses exceeding $1 billion. That just missed the record high of 28 such events that was set in 2023, according to the National Oceanic and Atmospheric Administration.
As a whole, home insurers have paid out more in claims and expenses than they received in premiums each year since 2020. In 2023, industry losses were 10.5%, the highest in over a decade.
As a result, many carriers have increased their premiums considerably. From 2020 to 2023, premiums have increased by 33%, rising to $2,530 annually on average, according to a recent NBER study. But even those higher premiums don’t yet accurately reflect current risk levels due to various regulations in the insurance industry.
Click here for more on the examination of home insurance premium trends in the housing market.
