Editor’s note: Marshall Brain – futurist, inventor, NCSU professor, writer and creator of “How Stuff Works” is a contributor to WRAL TechWire. Brain takes a serious as well as entertaining look at a world of possibilities for Earth and the human race. He’s also author of “The Doomsday Book: The Science Behind Humanity’s Greatest Threats.”
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RALEIGH – You might remember that back in August of this year, we were seeing lots of catastrophic news items related to climate change. There were massive heatwaves, droughts, rivers drying up, extreme flooding, Arctic heating, and so on. It seemed like some new climate catastrophe happened every day, and it all sounded bad.
Now it’s December and there is nowhere near the coverage of climate change catastrophes. Climate change has moved to a back burner. Why the difference? There are two reasons:
- First, in the Northern Hemisphere, July and August are the hottest months of the year. It is the height of summertime in the northern half of planet Earth. Temperatures reach their maximums, and energy in the atmosphere reaches its maximum. The Arctic Circle is heating up and melting in the summer, not the winter. Droughts are much more common in the summer compared to the winter. And so on.
- Second, most of the countries and most of the people who create “the news” in the developed world are located in the Northern Hemisphere. It is a strange but true fact that nearly 90% of the people who live on planet Earth live in the Northern half of the planet. And then, just about every person living in the “developed world” – the big news-writing areas – lives in places like the United States, Europe, and Japan. All these places are in the Northern Hemisphere.
Therefore, even though December is a summer month in the Southern Hemisphere, there are very few people, relatively speaking, who will be affected. And even fewer people to write about it. Thus, planet Earth tends to have a very strong Northern Hemisphere bias.
The First Major Climate Change Catastrophe
Nonetheless, even though climate change news seems to have diminished, climate change is still out there waiting to bite humanity once again. Each summer, things will likely get worse and worse on the climate change front. And therefore we might ask, what will be the first major catastrophe that befalls us living here in the United States? What is the event or the process that really shakes things up?
- Will it be coastal flooding as sea levels rise in major cities like Miami and Boston? This is going to happen, but it will not be first thing that shakes things up. It’s still several years down the line.
- Will it be water shortages in the American Southwest, making major cities like Las Vegas uninhabitable because of lack of water? This is very likely to happen, but it is probably a few years away as well.
- Will it be a huge heatwave like the ones seen in India and China this year? Maybe, especially if it is combined with a massive failure of a power grid. But two things argue against this: 1) a country like India has topographic reasons for its heatwaves that are not present in the United States, and 2) there is so much air conditioning available in the U.S. that we might be able to ride it out by staying inside until the heat wave passes.
The first major climate change catastrophe might come from something far more mundane. What if it is caused by insurance rates? This video can help introduce the problem: https://www.youtube.com/watch?v=NwlLBnXpPq8
The Problem with Insurance
Two of the largest and most heavily populated states in the United States are Texas and Florida. Texas is #2 with 30 million people, and Florida is #3 with 22 million people. In both of these states, insurance rates are rising for both homes and cars. What if rising insurance rates make these two states uninhabitable long before actual large-scale climate change events manifest themselves? What if rising insurance rates cause people to need to abandon these states in large numbers, and it becomes a mass migration scenario?
Let’s focus on Florida because the insurance situation is more dire there. There are three big problems for Florida homeowners:
- Big insurance companies are abandoning the state, leaving people uninsured and making insurance harder to get.
- Those insurance companies that remain are raising their rates significantly.
- The state of Florida itself is acting as an insurance company for some people, but another major catastrophe could wipe this fund out.
Add these three things together and people may soon be unable to afford to live in Florida because of the insurance situation.
Hurricane Ian, which hit in September of 2022, became a tipping point in Florida because it caused so much damage and destroyed so many homes. These headlines in the aftermath give you a taste of what is happening:
- Hurricane Ian exposed a flood insurance nightmare for homeowners in Florida
- Losses from hurricanes Ian, Nicole put pressure on Florida’s property insurance market
- Hurricane Ian victims struggling with insurance claim payouts seek help from public adjusters
- Hurricane Ian Destroyed Retirees’ Life Savings
- Attempts to fix Florida’s failing property insurance market
The last article offers this chilling paragraph:
“’The private home insurance market in Florida is on a trajectory toward total collapse,’ says Mark Friedlander, the Florida analyst for the Insurance Information Institute. ‘We’ve never seen anything like this man-made crisis anywhere else in the United States. Universal Property and Casualty, the largest private insurer in Florida, just announced a moratorium on writing new business in several Florida counties due to the unstable market. In total, 13 home insurers in Florida have stopped writing new business in either parts or the entire state since January.’”
The fourth article explains part of the reason why:
“Post-storm modeling from the analytics firm CoreLogic Inc. found that nearly 800,000 Florida homes saw hurricane force winds during the storm, with roughly 600,000 experiencing winds powerful enough to flatten a house.”
See also this video: https://www.youtube.com/watch?v=QAS6d_8PZYk
The big idea behind home insurance is to spread the risk of a low-frequency event, like a house fire in an individual house, across a large number of homeowners. Each homeowner pays a little bit of money to insure against a random housefire. The problem with a hurricane is that hundreds of thousands of homes all get destroyed at once. With so many homes in harm’s way when a hurricane comes ashore, the basic model behind home insurance breaks down. Insurance rates have to rise or the insurance companies have to go bankrupt.
Think about it this way. If a hurricane causes 200,000 homes suffer $200,000 in damage all at once, that’s $40 billion. If a major hurricane arrives every six years, you can start to see the problem. The insurance premiums need to raise more than $40 billion every six years. If a major hurricane arrives every two years, and the hurricanes are stronger because of climate change, the problem becomes three times worse. At that point the insurance premiums will eventually become too high for anyone of normal means to afford.
Florida Will Become Unaffordable
Hurricane Ian was a catastrophe affecting hundreds of thousands of people. Now imagine that Florida gets hit by another major hurricane next year. The insurance market in Florida is likely to become untenable. There will not be any solvent insurance companies left in Florida, or the premiums will be so high that people can no longer pay for insurance.
We can see how this problem stairsteps to catastrophe:
- A person can no longer afford to live in Florida because the insurance costs are too high, or there is no insurance available.
- The person tries to sell their home.
- But there are few or no buyers, because buyers would face the same insurance problems. Buyers will not be able to obtain mortgages, for example, without insurance.
- Therefore, in a normal marketplace, we would expect house prices to collapse.
- The collapse will affect homeowners, mortgage companies, banks, counties collecting property taxes, and so on.
It means that there could become many thousands of people who become trapped in Florida. They cannot sell their homes because there are no buyers. They cannot pay for insurance because the insurance prices are so high. Therefore, without insurance, they are simply waiting for the next hurricane to arrive to make them destitute and homeless. Or maybe their mortgage company kicks them out before that – the whole situation will become toxic eventually, because what does the mortgage holder do with a worthless house?
The observant homeowners in Florida who are looking ahead will be starting to see the writing on the wall. They will be quietly selling their houses and leaving the state right now rather than waiting, giving reasons like, “I want to be closer to my family” or “I have a new job in halfway across the country.” But the real reason is because they anticipate a possible collapse of the Florida housing market. This video gives us a taste of what is starting to happen: https://www.youtube.com/watch?v=8Wj-ru8jj1U
Eventually their numbers will swell until it starts looking like a mass migration out of Florida, and that’s when house prices will nosedive.
How will things unfold in Florida over the next several years? It may come down to the next hurricane season or two. If the hurricanes hold back and leave Florida alone, people may relax a bit and get complacent. But if Florida gets slammed by another major storm like Hurricane Ian next year, it could be the beginning of the end for the Florida housing market. Although insurance can seem boring and mundane, the fundamental math behind it could bring big parts of Florida to the point of economic collapse.
- https://www.youtube.com/watch?v=NwlLBnXpPq8 – Florida home insurance companies exit the state
- https://www.youtube.com/watch?v=QAS6d_8PZYk – Florida Faces Insurance Crisis From Hurricane Ian
- https://www.youtube.com/watch?v=8Wj-ru8jj1U – Florida receivership currently handling 8K claims, 2K lawsuits in homeowner insurance crisis