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How Climate Change Is Heightening Hurricane Insurance Risk

Law360 Insurance Authority

Sunday's landfall of Hurricane Ida in Louisiana as one of the most powerful storms to ever hit the U.S. underscores the challenges insurance carriers and policyholders face as climate change threatens to increase the frequency of the most destructive storms.


New Policy Solutions Needed

Insurers don't typically provide one catchall policy for the many threats posed by hurricanes. A homeowner will usually need to obtain coverage for the contents of a home, the home itself, windstorm damage and flood damage, according to Alan Rubin, a Blank Rome LLP principal who co-leads its severe weather emergency recovery team.

Rubin, who was tapped by President Bill Clinton to help lead Hurricane Andrew recovery efforts in South Florida in 1992, said that while not much has changed since then in the way communities rebuild after storms, what has changed are the difficulties consumers living in coastal areas face when trying to obtain insurance coverages.

Insurance pools like the Citizens Property Insurance Co. of Florida have helped some, providing insurance as a last resort, but they're limited as coverage solutions, Rubin said. Without insurance, he said, homeowners and businesses could have trouble securing mortgages that are necessary to their survival along the United States' Atlantic and Gulf coasts.

"States are going to have to figure out, along with the federal government, how to manage costs. They're going to have to help absorb the cost of insurance," Rubin said. "Insurance is going to have to become more geologically attuned to where you are in the country vis-à-vis the kinds of climate disasters that take place."

Another major cause of damage, Rubin said, is the mold that can grow in homes following a hurricane. Basic insurance policies don't cover that damage, he said, and in many cases mold policies are exorbitantly expensive, or just simply do not exist.

He said he expects more litigation over mold claims in the years ahead, and particularly in the humid Gulf and Atlantic states most vulnerable to hurricanes. Adding to the problem is the fact that mold doesn't develop immediately following water damage, opening up the possibility for disputes over what caused the mold to grow.

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"How Climate Change Is Heightening Hurricane Insurance Risk," by Eli Flesch was published in Law360 Insurance Authority on August 31, 2021.