As climate shocks mount, lawmakers are investigating insurers fleeing risky areas

WASHINGTON — Faced with mounting losses from hurricanes, floods and wildfires, major insurance companies are pulling out of California, Florida and Louisiana — a shift that threatens to undermine those states’ economies.

Now Senate Democrats are demanding that insurers tell them which places could be next.

On Wednesday, the Senate Budget Committee sent letters to 40 insurance companies, seeking documents showing where in the country these insurers have begun ripping off customers or are considering doing so. The committee, which has subpoena power, has given the companies until November 17 to respond.

“Climate-induced uninsurability has the potential to create cascading failures that undermine our entire economy,” Senator Sheldon Whitehouse, Democrat of Rhode Island and chairman of the committee, said in a statement. “With this research we are looking for information about where the dominoes might fall next.”

Banks usually require insurance when taking out a mortgage. If insurance becomes unavailable in a particular community, it becomes difficult for most potential buyers to purchase a home, leading to a decline in property values.

Mr. Whitehouse compared the accelerated withdrawal of insurance companies to the 2008 housing crisis and said a broad withdrawal of insurers “will have equally serious economic consequences.”

He said the study aims to “give advance warning” to the public if insurers could leave their communities.

But Mr. Whitehouse also wants to highlight the financial impact of global warming, and put pressure on elected officials who oppose steps to reduce greenhouse gas emissions that are warming the planet and causing more frequent and extreme disasters.

Republicans in Congress have generally opposed legislation aimed at reducing emissions, and former President Donald J. Trump rolled back more than a hundred environmental regulations. Officials who have opposed climate action “should be forced to consider hard evidence of what their inaction has wrought,” Mr Whitehouse said.

The letter went to the largest insurers in California, Florida and Louisiana, three states that have experienced a significant exodus of insurance companies. These companies are also among the nation’s largest insurers and include State Farm, Farmers, Nationwide, Progressive and Liberty Mutual. No one responded to requests for comment.

In May, State Farm announced it would stop selling coverage to California homeowners. In July, Farmers Insurance said it would stop renewing certain coverage in Florida, where the insurance market is dealing with lingering impacts from Hurricane Ian last year. A number of insurers have left Louisiana since a series of major hurricanes hit the state in 2020 and 2021.

The committee also sent the letter to the largest insurers in Texas, whose insurance market includes under stress.

In the letter, a copy of which was obtained by The New York Times, the committee asked insurers to explain how they use data from climate models to measure risk, and what that data says about the areas where those insurers do business.

The letter requests “all documents related to your company’s deliberations on climate-related losses and solvency.”

Mr Whitehouse has used his position as chairman to argue that a warming planet poses fiscal dangers. In June, the commission asked seven major insurance companies about their support for fossil fuel companies, through investments and providing coverage for fossil fuel projects.

A senior committee official said the information gathered could help inform future legislation, although insurance markets are mainly regulated by states. The data collected could also help state officials prepare for the withdrawal of some insurance companies, said the employee, who declined to be identified because he was not authorized to speak publicly.

In California, state officials have taken steps to make it easier for insurers to raise rates in exchange for their agreement to continue providing coverage in high-risk areas. In Louisiana, the state recently approved new subsidies to private insurers, essentially paying them to do business in the state.

Carolyn Kousky, an economist at the Environmental Defense Fund who studies the impact of climate change on the insurance market, said the committee’s investigation could also prompt elected officials to ask painful questions about how and where Americans build homes.

That could lead to tighter restrictions on new development, help people move away from areas vulnerable to extreme weather, or prohibit people from rebuilding after disasters in some areas, Dr. Kousky said.

These ideas are generally unpopular, but the prospect of the private insurance market collapsing in some areas could prompt officials to talk about them.

“We need a much more radical change in the way we think about risk reduction and climate adaptation,” said Dr. Kousky. “Some areas will become so risky that it will no longer be profitable to continue to have structures there.”