By Will Atwater

Well before Helene’s floodwaters reached western North Carolina, an overwhelmed U.S. insurance market was already dropping coverage in places that are prone to disaster — and even in towns and cities that aren’t. 

But as the number and intensity of natural disasters increase, the insurance industry will pass  on the financial pain to policyholders nationwide by raising premiums — particularly for people living in vulnerable areas like the North Carolina coast.

“Insurance is really what it costs to replace or repair something that’s been damaged,” Joe Stewart, vice president of government affairs for the Independent Insurance Agents of North Carolina, told NC Health News. “If the cost of those things is going up, the cost to provide for the replacement or repair of them has to go up. So if lumber is more expensive, then the cost of insurance is more expensive because you have to buy lumber to repair a house.”

While insurance companies press for higher premiums from policyholders to cover liability, state insurance commissioners are fiercely negotiating with the companies to keep rates as low as possible to ensure that people can continue to purchase homes; lenders typically require homebuyers who are taking out mortgages to have homeowners insurance.

Those negotiations can be challenging. 

North Carolina Insurance Commissioner Mike Causey celebrated the deal he struck recently with the insurance industry over rate increases for state homeowners.

“The insurance companies wanted to raise our homeowners’ rates up to 99.4 percent in some areas and an average 42.2 percent statewide in a single year,” Causey said in a statement made in mid-January. “I fought for consumers and knocked them back to 7 percent increases over two years with a maximum of 35 percent in any territory. We consider this settlement a big win for both homeowners and North Carolina.”

Short term win, long term headache?

Causey claimed that North Carolinians will save more than $750 million in premiums during the next two years. The next rate hike discussions are expected in 2027.

“These rates are sufficient to make sure that insurance companies, who have paid out large sums due to natural disasters and face increasing reinsurance costs due to national catastrophes, have adequate funds on hand to pay claims,” Causey said.

Whether Causey’s statement holds true remains to be seen — in North Carolina and around the country — as the combined estimated costs for destruction caused by Helene and the recent fires that ravaged the Los Angeles area are more than $300 billion. Those total costs could affect future premiums as a weakened insurance industry, already hemorrhaging from previous losses in markets like California and Florida, looks to pass on the costs to policyholders across the country. 

In North Carolina, as of Dec. 20, the claims filed related to Hurricane Helene totaled nearly $2.5 billion, with more than $1 billion in claims paid.

As of Jan. 30, roughly 31,210 claims related to Los Angeles’ Eaton and Palisades fires have been filed, and more than $4.2 billion has been paid to policyholders, according to information provided by the California Department of Insurance.

One might think the tragedies caused by Helene and the Los Angeles fires will only affect premiums in those areas. However, the costs will likely spread to people far from the scenes of devastation.

Insurance companies purchase their own insurance — known as reinsurance — to help manage risk exposure against catastrophic events, which would likely result in large payouts to settle policyholder claims. As with individual insurance policyholders, insurance companies pay reinsurance coverage premiums and are subject to rate increases.

Then those costs get passed on to everyday policyholders when reinsurance rates go up. 

For instance, the massive payouts from the Los Angeles fires could increase homeowner insurance rates nationwide for customers of some insurance agencies such as State Farm and Farmers Insurance Group, which are two of the top coverage providers in the California market. Rates could also go up for companies that get their reinsurance from the same companies as State Farm and Farmers, as the reinsurers look to cover their costs.

‘It’s not complicated’

Hurricanes, forest fires and extended periods of drought and extreme heat are driven by a changing climate fueled by a continued reliance on fossil fuels, which send heat-trapping greenhouse gases into the atmosphere, destabilizing weather patterns and threatening the natural environment, economy and human life, experts warn.

For example, a report published in January in JAMA highlights the adverse effects of extreme heat on older adults. “Extreme heat can cause life-threatening heat stroke, exacerbate chronic conditions including cardiac, respiratory, and kidney diseases, and increase the risk of geriatric syndromes including orthostatic hypotension and falls,” the authors wrote.

But the recent disasters do more than shed light on risks to human health as the climate warms. The tragedies portend a destabilized housing market if current trends hold and the homeowners’ insurance market continues to retract, making it harder for people to purchase homes and afford premiums.

“It’s not that complicated,” Mark Hertsgaard, executive director of Covering Climate Now, said during a recent webinar.

“Property that can’t be insured cannot obtain a mortgage,” Hertsgaard said. “It’s also all but impossible to sell that mortgage without cutting the price to pennies on the dollar, and since homes are the single largest asset for most households in the United States, slashing their resale value could crash housing markets.”

More risk, higher premiums

In North Carolina, people who own homes in eastern coastal areas of Brunswick, Carteret, New Hanover, Onslow and Pender Counties will see, at minimum, a nearly 21 percent increase in premiums during the next two years, according to information provided by the North Carolina Department of Insurance.

The increase — 71 percent higher than the project stated average — is largely based on the history of storms that have struck the coast. In recent years, that list includes hurricanes Isias, Matthew, Florence and Dorian, and effects from Hurricane Joaquin, which did not make a direct hit on the mainland U.S.

“It’s not about if [a hurricane] is going to happen, it’s going to be more about when it happens,”  a North Carolina Department of Insurance spokesperson said by phone.

During the 44-year period from 1980 to 2024, the Tarheel State experienced more than 100 “confirmed weather/climate disaster events with losses exceeding $1 billion each,” according to information provided by the National Oceanic Atmospheric Association. During those four decades, the state averaged nearly three events per year, NOAA states. However, during the most recent five-year period (2020-25), the average increased to more than seven events annually.

Hurricane Helene caused significant property damage to homeowners in Buncombe and Mitchell counties. Still, their rate increases are much lower than the state average, with an expected two-year rise of roughly 9 percent and 2 percent, respectively.

The proposed agreement reached between Causey and the North Carolina Rate Bureau lasts for two years. So it’s possible that homeowner insurance rates in Buncombe, Mitchell and other western North Carolina counties affected by Helene will also rise to reflect losses incurred by the insurance market in 2027, when rates are renegotiated.

“Relatively speaking, if we get through the spring and don’t have significant wildfire activity in the West, if we get through hurricane season and don’t have a significant event that impacts North Carolina, then maybe we’ll be fine,” Stewart said.

But he noted that “It’s just a very challenging insurance marketplace right now, and there are a lot of factors beyond our control.” 

Insurance of last resort

For North Carolina property owners who are unsuccessful in securing the type of insurance they want, there are plans provided by two intertwined nonprofit organizations. The first is the FAIR plan (short for Fair Access to Insurance Requirements), which is administered by the North Carolina Joint Underwriting Association and offered primarily to inland property owners. For coastal residents, there’s the Coastal Property Insurance Pool, which is managed by the North Carolina Insurance Underwriting Association.

The two nonprofit organizations provided $205 billion in coverage for more than half a million policies. They paid $1.7 billion in claims after Hurricane Florence in 2018, according to information provided by Arch Capital Group, a global insurance provider.

In an analysis, Arch Capital said that “North Carolina exemplifies robust public insurance planning, which is crucial in a state prone to wind storms.”

“There are many reasons why someone might need coverage from us,” said Gina Hardy, chief executive officer of the North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association. “They may have a history of claims, live far from a fire department, own a high-risk dog, have an older home with outdated features like a roof or plumbing system that doesn’t meet private insurance requirements, or reside in an area with a higher risk of catastrophic loss—making it difficult to obtain homeowners insurance through the private market.”  

Unlike some state FAIR plans on shaky ground, Hardy said she’s pleased with the services the nonprofit organizations provide North Carolinians who need them: “This is my 14th year as CEO, so I’ve done this for a long time in North Carolina. And we’ve been very stable over that period of time.

“After Hurricane Florence, the North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association paid 90 percent of our 100,000 claims in 60 days,” she added.

North Carolina is one of 34 states and the District of Columbia that offer FAIR plans.

For owners of beach property that qualify, the North Carolina Insurance Underwriting Association “offer[s] grants to eligible policyholders in beach communities to help better protect their homes against hurricanes,” according to information provided by the organization. Those that qualify can apply for up to a “$10,000 grant toward the installation” of a hurricane-fortified roof.

North Carolina Sen. Thom Tillis has co-sponsored federal legislation to make such grants aimed at making homes more disaster-proof excluded from being taxed as income.

Protection against a worrisome trend

Causey, who said North Carolina has “the lowest average homeowner rates [among] southeastern states,” suggested steps people could take to ensure that they have good coverage, including shopping around for the best rates and getting quotes from local agencies when possible.

He also recommended that people carry the highest deductible they can afford and refrain from filing a series of small claims that could result in higher premiums down the road — or lead to being dropped by an insurer.

He also suggested a specific category of insurance people should purchase if they can afford it.

“People need to have replacement value coverage because if you don’t have replacement value coverage, you’re going to cry when you get the claim check,” Causey said. “Insurance companies use something called Actual Cash Value […] and that means depreciated value.” 

Causey said people who don’t have replacement value insurance will get short-changed by depreciation when it’s time to replace items they may have had for years.

“If you have replacement value coverage and that new furniture costs $1,200, you’ll get that. It is worth a few extra dollars in your premium to have replacement value coverage, the same with the automobile.”