Budget Committee Launches Investigation into Climate Change-Fueled Insurance Crisis

As insurers drop customers and hike premiums, the Committee sent letters to 41 insurers seeking answers on who will be affected next

Washington, D.C.—Senator Sheldon Whitehouse (D-RI), Chairman of the Senate Budget Committee, and fellow Committee member Senator Ron Wyden (D-OR) launched an investigation into how insurance companies are navigating mounting risks from climate change, including where companies will next pull coverage or raise premiums. The inquiry builds on a related investigation the Committee launched in June into the U.S. insurance industry’s decisions to continue investing in and underwriting fossil fuel expansion projects that drive climate change. 

In light of the economy-wide harms from widespread uninsurability, the Senators sent letters to the 20 largest private sector insurance companies in California, Louisiana, Florida, and Texas—a total of 41 companies—to request documents and information related to the companies’ plans to address increased underwriting losses from climate disasters. 

“The Committee is increasingly concerned about the potential economic consequences of an eventual widescale decline in property values caused by increasing exposure to climate risks and the attendant increase in insurance premiums and decrease in insurance availability,” wrote the Senators. “Should such a situation come to pass, the effects on households—and federal revenues and spending—would be quite damaging and long-lasting, as we saw during and after the 2008 financial crisis.”  

Among other requests, the Senators are seeking information related to the following: 

  • Current consideration of risks from climate-related extreme weather events, sea level rise, and/or wildfires when determining property and casualty insurance premiums for homes, rental units, automobiles, commercial properties, and/or crops; 
  • Premium rate forecasts over the next five years;  
  • Climate-related threats to company solvency; and 
  • A list of all counties (or county equivalents) in the United States in which the subject company has not renewed a minimum threshold of homeowners’ policies in years 2018 through 2023. 

The Committee has held a series of hearings on the economic toll of climate change.  Insurance industry executives, economists, actuaries, and other experts have testified that climate change could trigger cascading failures that undermine financial and economic stability. Their testimony has made clear that:  

  • Climate-related losses have already grown substantially and are projected to continue to rise;  
  • As climate-related risks increase, insurance premiums will increase and/or insurers will pull out of at-risk markets;  
  • As insurance becomes increasingly expensive and/or unavailable, property values in affected markets will decline;  
  • Insurance unavailability will cause affected properties to become unmortgageable; and  
  • A widescale decline in coastal and wildland-urban interface (WUI) community property values would present a systemic risk to the U.S. economy, similar to what occurred in the 2007-2008 mortgage meltdown.  

Letters were sent to American International GroupAllied Trust, American Integrity, Allstate, American FamilyAmTrust, Applied Underwriters, Auto Club Enterprises, AXA, Berkshire Hathaway, Chubb, CNA, CSAA, Fairfax, Farmers, Florida Peninsula, First Protective, Gulf States, Hartford, Heritage, Homeowners of America, Homeowners Choice, Kemper, Louisiana Farm Bureau, Liberty Mutual, Mercury General, Nationwide, Olympus, People’s Trust, Progressive, Security First, Shelter Mutual, Slide, State FarmSURE, Tokio Marine, Tower Hill, Travelers, Universal Insurance Holdings, USAA, and Zurich. The companies have until November 17, 2023, to respond to the Committee’s request.  

In June, Chairman Whitehouse, joined by Senators Wyden and Sanders (I-VT), launched an investigation into how the U.S. insurance industry evaluates climate-related risks, decides to invest in or underwrite fossil fuel expansion projects that drive such risks, and prices policies that insure such projects. Although the Committee is actively engaging with each of the companies and reviewing documents they have provided, it has seen little evidence to date of meaningful industry plans to align investments and underwriting decisions with the Paris Agreement benchmarks necessary to stave off the worst effects of climate change.