Insurance Firms Cut Coverage to Avoid Climate Risks

The insurance sector has long shaped how society addresses climate risks, but a recent Inside Track report suggests a shift toward excluding those risks from coverage. This new report says insurers are now selling coverage that explicitly excludes climate-related risks.

Inside Track warns that risk levels are not being communicated to government, a failure that could translate into major economic risk similar to the Global Financial Crisis. The report points out that an increase in uninsured, high‑risk properties could create a financial shock as climate impacts intensify.

Insurance firms are already taking steps that will likely accelerate. They are repricing policies so they become unaffordable, restricting coverage such as removing wildfire protection from building insurance, and withdrawing provision from certain sectors, geographies and communities, including many farming areas.

Concrete examples illustrate the trend: in the United Kingdom, some homes are already deemed uninsurable because of rising flood risk; in the United States, State Farm has cut wildfire coverage for homeowners in California; and in Florida and Louisiana hurricane insurance costs have risen threefold since 2023, with many customers unable to find coverage at all.

The industry’s actions are driven by short‑term profit motives. Most policies are written for only one year, which masks long‑term risks, and actuaries are pressured to lower future projections to keep premiums low and avoid alarm. This practice leaves clients unprepared for climate‑induced losses.

Capitalist incentives further fuel the problem. Local governments want high‑rise developments on the edge of oceans to boost tax revenue, while insurers profit from the premiums. The focus on immediate gains short circuits the assessment of long‑term risk for everyone involved.

The article indicates that if insurers continue to suppress information and limit coverage, the economic and social costs of climate change could become far greater than the industry currently anticipates.