Florida’s home-insurance business was in trouble even before Hurricane Ian tore across the state last month. Big insurers were taking their business elsewhere, smaller ones were going broke, costs due to litigation and fraud had soared, and so had premiums. The private market was pulling back as the risk of weather-related damage mounted, leaving homeowners to buy protection from the state-backed Citizens Property Insurance Corp. and the federal National Flood Insurance Program — or else to go uninsured.
This creaking system could be flattened altogether by Ian. Expect an epidemic of new litigation as insurers and policy holders fight over what destroyed their homes. (Standard policies cover damage from wind but not from flooding.) Costs to private insurers alone could reach $63 billion. This worsening mess proves, for the umpteenth time, that rebuilding homes and other structures isn’t good enough: The public and private treatment of weather-related risks needs to go back to the drawing board.
When the hybrid public-and-private insurance market meets current policy on disaster relief and resilience, the result is mispriced risk, misallocated investment, and a mounting toll of suffering and cost. Climate change is adding to the danger of severe storms, yet the current approach discourages responsible choices on what gets built and where. The errors pile up, and the system promptly validates them.
