Extreme Weather Events Call for Stronger Insurance Solutions for Homeowners

Climate change and the increasing frequency and severity of extreme weather events are causing damage to property, exacerbating risks for both homeowners and insurers across the U.S. As the current homeowners insurance market struggles to keep pace with these challenges, National Mortgage Professional reports that one solution being proposed is the creation of the Federal Natural Hazard Insurance Corporation (FNHIC). 

This federally chartered government-sponsored enterprise would provide a national insurance solution, offering separate insurance policies for natural disasters, distinct from standard homeowners insurance and with coverage based on specific local risks. The FNHIC would absorb the Federal Emergency Management Agency's National Flood Insurance Program and expand its scope to cover a broader range of natural hazards. At the same time, private insurers would continue to provide standard homeowners insurance unrelated to extreme weather events.

As the variation and uncertainty in premium determination impacts insurers’ ability to charge a price commensurate with the risks taken in that state, pressure on premiums has been mounting in the past decade due to an escalating frequency of natural disasters and claims.

At $65 billion, the property and casualty insurance sector experienced the highest catastrophe losses in a decade in 2023, according to data from AM Best, a credit rating agency that specializes in insurance. That same year, the National Oceanic and Atmospheric Administration (NOAA) recorded 28 separate natural disasters exceeding $1 billion in damages. 

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