During a recent press conference, Crawford shared insights and policy suggestions from the paper alongside Benjamin Keys, professor of real estate and finance at The Wharton School of the University of Pennsylvania.
“The pace of climate change and the disasters are so much more rapid than policymakers are able to react,” he said. “The severity is outpacing what we can handle as a country with what we build and the policies that we make. We went from 3 per year in the 1970s, and last year there were 27 climate events. We are in an entirely different world when it comes to climate induced disasters.”
Keys’ recent paper, “Property Insurance and Disaster Risk: New Evidence from Mortgage Escrow Data,” shows that insurance premiums increased 33% from 2020 to 2023. The paper also demonstrates the causes and impacts of rising reinsurance that is passed through to homeowners. The paper projects that this reinsurance shock could result in annual premiums going up $700 by 2053.
Every housing stakeholder will need to be part of creating solutions for this growing issue.
“There will be continued pressure on regulators for regulatory flexibility,” Keys said. “In many ways, they have a hopeless job with competing contentions. Need to be able to price the risk more accurately and more appropriately, but homeowners want to keep insurance rates down. State regulators are having a hard time reconciling.”
Plus, homeowners need to play a bigger role by being educated and by opting out of moving to high risk areas.
“Homeowners should have choices in a robust and stable insurance market,” he said. “Prices should reflect risk to facilitate decision making. Keeping insurance costs low doesn’t help for long term decisions. This is an essential market that makes the housing market function. Solutions are there, it just means acknowledging much higher costs to live in harm’s way.”
