New Report Offers Critical Policy Lessons for Florida on Insurance and Climate Risks in Light of Recent Hurricanes

(Miami, FL – November 18, 2024) As Florida reels from the devastating impacts of Hurricanes Helene and Milton, a new paper published in PNAS provides timely insights into the intersection of climate risks, property insurance, and policymaking. The paper, titled "Insurance and Climate Risks: Policy Lessons from Three Bounding Scenarios," identifies key policy recommendations to stabilize insurance markets and protect vulnerable communities in the face of increasing climate disasters. 

“Helene and Milton have showed us that our current insurance systems are not equipped to handle the scale of climate-related risks we now face,” said Dr. Carolyn Kousky, Acting Chief Economist at Environmental Defense Fund. “This research outlines critical steps that policymakers can take to mitigate future risks and ensure insurance remains available and affordable for all Floridians.” 

The report examines three scenarios representing different policy paths Florida could take to manage insurance challenges driven by growing climate risks. The findings reveal that decisions made today will significantly influence long-term outcomes, including the stability of insurance markets, housing affordability, and economic resilience. 

Key policy recommendations from the report include: 

• Invest in Risk Reduction: Sustainable solutions must reduce underlying risks, not just mask them. Public and private sectors must work together to promote climate adaptation and risk reduction strategies, including improved building standards and resilient infrastructure. 
• Align Insurance Prices with Risks: Allowing insurance prices to reflect real risks sends vital signals to markets about unsafe development practices, while ensuring that low-income households can access affordable coverage through targeted assistance. 
• Avoid Systemic Risks: Florida’s multiple insurance programs are interconnected with housing, mortgage, and bond markets. A failure to manage these linked systems could lead to widespread market collapse, particularly following a severe hurricane season like the one recently experienced. 
• Equitable Access to Insurance: Deliberate attention must be paid to ensure lower-income communities are not disproportionately affected by rising insurance costs and climate impacts. Without intervention, inequality will worsen, leaving vulnerable populations without the financial protection needed to recover from disasters. 

“All residents want their homes and communities to be safe from storms and flooding. As climate change worsens these risks, there is a range of policies Florida can adopt to help lower losses and provide widespread and affordable financial protection. As Hurricanes Helene and Milton have shown, delaying action on climate adaptation and insurance reform is not an option. The future of Florida’s resilience rests on the policy choices made today, with state leadership continuing to play a crucial role in ensuring affordable, equitable protection for all Floridians.” said Dr. Carolyn Kousky. 

"Exploring possible futures is essential in making sure our choices now add up to long-term resilience for everyone,” said co-author Katharine Mach, professor at the University of Miami Rosenstiel School of Marine, Atmospheric, & Earth Science.  

The report also stresses the need for policymakers to adopt a forward-looking approach, using scenarios to explore the range of possible outcomes and avoid anchoring decisions on outdated historical data. 

The full report, authored by experts Drs. Carolyn Kousky, Galen Treuer, and Katharine J. Mach, "Insurance and Climate Risks: Policy Lessons from Three Bounding Scenarios," is available here. 

About the Authors: 

• Carolyn Kousky is the Acting Chief Economist at Environmental Defense Fund and author of Understanding Disaster Insurance 
• Galen Treuer leads Climate Tech and Economic Innovation for Miami-Dade County, Office of Economic Development 
• Katharine J. Mach is professor and chair of the Department of Environmental Science and Policy at the University of Miami Rosenstiel School of Marine, Atmospheric, & Earth Science