Insurance premiums set for sharp rise amid increasing climate risks

Home insurance premiums are set to rise significantly in certain disaster-prone cities over the coming decades, according to a new analysis by climate risk firm First Street. The report projects that between now and 2055, Miami will see the highest increase with premiums expected to jump by 322%. Other cities facing substantial increases include Jacksonville (226%), Tampa (213%), New Orleans (196%), and Sacramento (137%).

The anticipated hikes are largely attributed to rising risks of climate-related disasters such as hurricanes in coastal areas and wildfires in places like Sacramento. Jeremy Porter, head of climate implications research for First Street, explained that "over the next 30 years, we’re likely to see more hurricanes move into the mid-Atlantic and move farther northward," which could lead to further cost increases.

Porter also highlighted that current home insurance policies often do not reflect actual risk levels due to state regulations on rate hikes. This has resulted in significant losses for insurers. He stated, “So taken together, we have sort of the recipe here, where insurance is increasing.”

First Street's national estimates suggest a potential 29.4% increase in average home insurance premiums by 2055 if free-market pricing were implemented. This figure includes an 18.4% correction for underpricing and an additional 11% from growing climate risks.

The projections focus on traditional homeowners' insurance costs but do not account for flood insurance prices, which could also rise sharply. Flood damages are expected to increase nationally by an average of 28% by 2055 according to First Street’s flood model.

In recent years, insurers have struggled with losses from major disasters like hurricanes and wildfires. In 2024 alone, there were 27 confirmed weather or climate disaster events with losses exceeding $1 billion each.

Despite premium increases averaging 33% from 2020 to 2023—reaching $2,530 annually—current rates still may not accurately reflect existing risk levels due to regulatory constraints. For instance, California requires approval for rate hikes above certain thresholds while Florida imposes similar restrictions.

These regulations contribute to a pricing disconnect that may either lead to rapid future premium increases or prompt insurers to withdraw from high-risk markets altogether.