A man pulls a boat through a flooded neighborhood in Barataria, La., in August 2021 after Hurricane Ida hit the area, one of several storms that have battered Louisiana in recent years. Amid billions in losses, many insurance companies have left the state or increased premiums. As climate change intensifies natural disasters, policymakers across the country are trying to convince insurers to stick around. (Brandon Bell/Getty Images)

In the coming years, climate change could force Americans from their homes, not just by raising sea levels, worsening wildfires and causing floods — but also by putting insurance coverage out of reach.

In places including California, Florida and Louisiana, some homeowners are finding it nearly impossible to find an insurance company that will cover their property. Others have seen their premiums climb so high that they can no longer pay. Experts say the trend is spreading throughout the country as natural disasters increase.

Most mortgage lenders require homeowners to maintain insurance. Without access to coverage, millions of Americans could find themselves forced to reconsider where they live. Consumer advocates say long-overdue conversations about development in areas prone to natural disasters are being driven by property insurers, not governments.

“Insurance companies have basically become our land-use officials,” said Doug Heller, director of insurance with the Consumer Federation of America, a research and advocacy nonprofit. “In 2023, the industry suddenly seemed to wake up and say, ‘There’s climate change, forget all those times we’ve nodded our head yes and told you that you can live there.’”

As the crisis escalates, state leaders are desperately trying to convince insurance companies to stick around. States are offering them more flexibility to raise premiums or drop certain homes from coverage, fast-tracking rate revisions and making it harder for residents to sue their insurance company.

Meanwhile, a flood of new policyholders are joining state-backed insurance “plans of last resort,” leaving states to assume more of the risk on behalf of residents who can’t find coverage in the private sector.

“Insurers are the climate change canary in the coal mine.” – Dave Jones, director of the Climate Risk Initiative, University of California, Berkeley’s Center for Law, Energy & the Environment ? ?

Industry leaders note that insurance companies have been hammered by heavy payouts — last year, 28 separate U.S. natural disasters caused at least $1 billion each in damage, according to federal figures — and say they simply can’t afford to provide coverage in the areas that face the highest risk.

Disaster costs are soaring. In the last five years, there have been 102 disaster events in the United States that caused at least $1 billion in damage. In the entire decade of the 1990s, there were 57 billion-dollar events (adjusted for inflation), and in the 1980s there were 33.

Natural disasters are increasing at the same time risk-prone areas are becoming ever more populated, and as property values are climbing. The price of repairs and replacement have skyrocketed due to inflation, workforce and supply chain issues. Insurers say costs also have been driven by an uptick in litigation and fraud.

“We’re experiencing record-breaking losses as it relates to natural disasters,” said Adam Shores, senior vice president for state government relations with the American Property Casualty Insurance Association, an industry group. “We want to be there, but when the math doesn’t work for a company, they have to make those decisions.”

While the insurance crisis is most acute in certain coastal states, climate experts say every region will face similar challenges, especially as severe storms batter the middle of the country. While some states have made marginal gains in stabilizing the insurance market, some experts say that progress may be short-lived.

“Insurers are the climate change canary in the coal mine,” said Dave Jones, the former insurance commissioner in California and director of the Climate Risk Initiative at the University of California, Berkeley’s Center for Law, Energy, & the Environment. “While these policy and regulatory interventions might help in the short run, they’re likely to be overwhelmed by the increasing risk and loss.”

‘The perfect storm’

In some hard-hit states, policymakers have focused on giving insurance companies more flexibility to adjust their rates and coverage options.

Four hurricanes walloped Louisiana in 2020 and 2021, causing $23 billion in insured losses. Twelve insurance companies became insolvent and dozens left the state. Residents in southern Louisiana especially have struggled to find coverage, and some have moved elsewhere because they couldn’t afford their premiums.

“It’s the perfect storm,” said Louisiana state Rep. Gabe Firment, a Republican. “We just do not have companies willing to write business in Louisiana right now, and you can’t blame them.”

Firment sponsored a measure, enacted this year, repealing a state rule that had blocked companies from dropping long-standing customers. Those dropped can join a state-run plan. Lawmakers hope that — given the ability to cancel the highest-risk policies — insurance companies will remain in the state and avoid massive rate hikes on their remaining customers.

Legislators passed a suite of other laws aimed at the crisis, speeding up the process for insurers to adjust their rates, extending a grant program to help residents fortify their homes and giving companies more time to pay out claims. Firment said the changes are designed to attract more companies back to the state, “but if we get two or three hurricanes this year, all bets are off.”

In California, many major insurers have canceled policies or stopped accepting new applications due to wildfire risk. Regulators there have proposed a rule that would allow companies to incorporate climate change projections into the models they use to set their rates.

“Insurers are not going to continue to write in every market if they can’t price accurately,” said Mark Friedlander, director of corporate communications with the Insurance Information Institute, an industry-backed research group.

Meanwhile, Democratic Gov. Gavin Newsom has put forth a measure that would speed up regulators’ approval of the rate revisions proposed by insurance companies. While seeking to give insurers more flexibility on rates, California leaders also have sought to protect residents by establishing a one-year moratorium on policy cancellations in disaster areas following a wildfire.

Officials at the state Department of Insurance did not respond to Stateline interview requests.

Homeowners’ insurance rates in Texas spiked 23% last year, twice the national average. The state has endured a myriad of disasters in recent years, but consumer advocates fear insurers are weaponizing climate change to jack up rates and demand looser regulations.

“[Insurance companies] are putting a gun to our heads, telling us, ‘Do it our way or we’ll pull up stakes,’” said Ware Wendell, executive director of Texas Watch, a nonprofit advocacy group. “They’re going to cherry-pick the country and only insure parts of the country that have less climate risk.”

The Texas Department of Insurance did not grant a Stateline interview request.

‘Last resort’

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In several states, homeowners who can’t find private coverage are joining state-run plans. Originally intended to be a last-ditch option, because they generally offer limited coverage, these plans are seeing more and more residents signing up.

Florida has seen more than 1 million residents join the plan offered by the state-run Citizens Property Insurance Corporation. The plan, which is meant to be a “last resort” option, now stands as the largest in the state.

Insurance rates in Florida have climbed to four times the national average, following hurricanes Ian and Nicole in 2022. The state also has seen an uptick in claims lawsuits that insurance companies characterize as legal abuse.

Legislators changed state law in 2022 to disincentivize such lawsuits, ending homeowners’ ability to collect attorneys fees from insurers in claims disputes. State regulators say insurance rates have stabilized in 2024, and new companies are joining the market. The Florida Office of Insurance Regulation did not grant an interview request.

But some lawmakers say state leaders are eager to help insurance companies while ignoring the underlying issue of climate change.

“Stabilization is important, but [premiums] have stabilized at high rates,” said state Rep. Anna Eskamani, a Democrat. “Floridians can’t afford Florida anymore, and if we’re not taking climate change seriously, then we’re missing the point.”

Eskamani called for leaders to change land-use policies to limit development in high-risk areas.

Even as some Florida homeowners are now shifting from the state-run plan back to the private market, industry experts say the nationwide surge in state-backed policies is troubling. If such plans exhaust their reserves, states impose an assessment on either all insurance companies or all individual policyholders — known in Florida as the “hurricane tax.”

Jones, the former California insurance commissioner, noted that insurers there are worried that growing wildfire risk could force them to bail out the state plan. Nearly 400,000 Californians rely on the state plan for insurance, and state officials have warned that a catastrophic event could wipe out its reserves.

While Californians struggle to find insurance on the private market, Jones called out the insurers that are dropping policies even as they retain financial ties to fossil fuel companies.

“Why are insurers investing in and writing insurance for the very industry that’s making it increasingly challenging for them to write insurance in certain parts of the country?” he said.

In Colorado, lawmakers voted last year to create a state-backed insurance plan like those in more than 30 other states. State Sen. Dylan Roberts, the Democrat who sponsored the bill, said he heard from constituents who were getting dropped by their insurers following the Marshall Fire that swept through Boulder County in 2021.

Lawmakers hope to use this emerging climate science to charge oil companies for disasters

“We’re going to have more and more Coloradoans every year who are unable to find insurance for their property on the private market,” he said. “To have an insurer of last resort is something we hope isn’t used widely, but it’s something we need to have.”

Some consumer advocates believe states will have to get more involved. Amy Bach, executive director of United Policyholders, a nonprofit that advocates for insurance customers, said governments face the same difficult risk calculations as private companies but are tax-exempt and don’t face the same pressures to return high profit margins to shareholders.

“Publicly supported insurance programs are here to stay,” she said. “It behooves us to build them as smart as we can.”

In Washington state, regulators say they have only a few hundred policies on the state-backed plan, a sign that residents can still access coverage on the private market. David Forte, senior property and casualty policy adviser with the Office of the Insurance Commissioner, said the agency has added actuarial staff to speed up insurers’ rate revision approvals.

He also credited the work of state leaders who have invested millions to reduce wildfire risk. But he cited a 2022 wildfire that nearly swept through the town of Index, before shifting winds changed its direction.

“If that had happened, I think our property market would be different,” he said. “Are we just one bad event away? Probably.”

This story is republished from Stateline, a sister publication to the Kentucky Lantern and part of the nonprofit States Newsroom network.

Workers replace older water pipes with a new copper one in Newark, N.J., Thursday, Oct. 21, 2021. (AP Photo/Seth Wenig)

For residents in some Pennsylvania communities, flushing the toilet has suddenly gotten much more expensive.

In many townships and counties, rates have spiked as private water companies have bought up wastewater systems from local governments.

The new push to privatize sewer services follows the passage of a state law in 2016 that allows the dollar value of water systems to include not just pipes and plants but market factors such as their worth to the community, allowing them to be sold at much higher prices.

Community groups and municipal leaders say that law, an example of “fair market value” legislation, has unleashed dozens of buyout attempts as private companies have offered tens of millions of dollars for local water systems. Pennsylvania’s municipalities have been at the forefront of the national movement, though an ongoing court case could slow the state’s momentum.

The deals provide a short-term cash boost for local governments, which can struggle to cover the cost of aging infrastructure. But critics say the public services and tax savings that governments might provide residents with the quick money don’t make up for the rate hikes, a phenomenon known as “taxing through the tap.”

“Big Water tells municipal officials, ‘You’re going to get free money.’ “That’s a lie. That money is going to be paid for by ratepayers,” said Bill Ferguson, a co-founder of Keep Water Affordable. The community group protested the 2020 sale of the wastewater system in New Garden Township, a community of about 11,000 residents near the Delaware border, to Aqua Pennsylvania.

Fifteen states have enacted “fair market value” laws to boost the sale price of water systems, according to the National Association of Water Companies, an industry group. Most of those laws have passed within the past decade, with Florida becoming the latest earlier this year. Public water activists say the private water industry has lobbied hard in state capitols, while also pushing Congress to provide them with federal funding that has historically been reserved for local governments.

Investor-owned Kentucky American Water touts ‘regionalization’

In Kentucky, “fair market value” legislation has been introduced in recent years but did not advance after drawing opposition from the Kentucky League of Cities, Lexington Mayor Linda Gorton, the Kentucky Resources Council and the Attorney General’s Office of Rate Intervention when the AG was Andy Beshear, now Kentucky’s governor.

The biggest beneficiary of changing Kentucky’s law would be Kentucky American Water which has framed the legislation as a way to achieve economies of scale through regionalization. Kentucky American is a subsidiary of investor-owned American Water, based in New Jersey, the nation’s largest private water and wastewater company.

Kentucky’s current law values utilities being sold at depreciated book value and “ensures customers do not pay twice for the pipes in the ground that deliver their water,” wrote Rebecca Goodman, then executive director of the rate intervention office in opposition to Senate Bill 163 in 2019. Rep. Jared Carpenter, R-Berea, was the sponsor.

“An additional concern,” she wrote, is that under a “fair market value” law, the acquiring “investor-owned utility has no incentive to keep the purchase price down since its shareholders will earn a return on the value of the assets.” Goodman is now secretary of the Energy and Environment Cabinet.

“SB 163 benefits only the investor-owned utilities and its shareholders, “Goodman wrote, “Existing and newly acquired customers will see their rates increase as the utility’s rate base increases.”

Costs of private ownership

Research published last year in Water Policy, the journal of the international think tank World Water Council, surveyed the United States’ 500 largest water systems and found that private ownership was the most significant variable in driving up utility bills — even more than aging infrastructure, water supply and local regulations.

While the survey focused on drinking water systems, Marcela González Rivas, an associate professor in the Graduate School of Public and International Affairs at the University of Pittsburgh and one of the study’s authors, said privatization of any system conflicts with the human right to water.

“Providing water is really expensive as it is,” she said. “If you then add making a profit as part of the cost of the service, it just makes it really unaffordable.”

New Garden Township was the first sewer sale that state regulators approved after the passage of Pennsylvania’s valuation law. Ferguson’s group says the community?has seen bill increases approaching?85%?since the takeover.

Opponents of valuation laws say the measures have largely passed with little public awareness or controversy, as water companies have donated heavily to Republicans and Democrats alike. At the local level, residents are often unaware that their water system is up for sale until a deal is being finalized.

“If someone else had been No. 1, we might have had time [to stop it],” said David Unger, chair of the New Garden Township board of supervisors, who was elected after the sale was finalized. “The fact that we were first in line — we became the lesson.”

‘Fair market value’

Roughly 97% of sewer customers in the U.S. get their service from a public system, according to the U.S. Government Accountability Office. But private water companies, which control more than 10% of the drinking water market, are pushing to get into the wastewater business. In many states, “fair market value” legislation has been a key tool in that effort.

Historically, the sale price of regulated water systems has been determined by the book value of their assets, including pipes and treatment plants. But these new state laws enable outside appraisers to incorporate other factors, such as the system’s value to the community. Critics say that has allowed systems to sell for many times what they’re worth.

For local governments, the higher prices under the fair market value model make it enticing to sell off their infrastructure. And the water companies want a higher sale price as well: Higher acquisition payments allow the companies to charge higher rates to recover those costs, driving up profits, which are determined by a percentage of their investments.

“Both the seller and buyer want the highest price possible,” said Mary Grant, director of the Public Water for All campaign with Food and Water Watch, an environmental advocacy nonprofit. “Who loses? It’s the ratepayers.”

The private water industry argues that privatization is an important tool when cash-strapped municipalities can’t keep up with the maintenance needs of their aging infrastructure. Fair market value, they say, gives local governments financial relief via the hefty sale price.

“Most of the time it is willing seller, willing buyer,” said Jenn Kocher, vice president of communications and marketing with the National Association of Water Companies, a trade association. “Municipalities … see that there are better options out there through private systems and their economies of scale.”

Many public water advocates acknowledge that sell-offs can help keep water systems running when municipalities can’t afford the maintenance costs. But in Pennsylvania, they say, many of the systems being bid on are in perfectly fine shape.

“I don’t think they’re targeting distressed systems at all,” said Kofi Osei, a member of Towamencin Neighbors Opposing Privatization Efforts, a local activist group. “Our system is actually very well maintained, and we recently did some pretty substantial upgrades.”

Osei’s group is fighting the sale of the sewer system in Towamencin Township, a community of nearly 18,000 residents near Philadelphia, to American Water. Activists backed a home rule charter, passed by voters this year, to amend the county’s governing document to ban privatization of the system. Township supervisors, Osei said, are still trying to proceed with the sale, while residents are suing them to block it.

Neither American Water nor township Board of Supervisors Chair Chuck Wilson responded to an interview request.

‘Ground zero’

In Pennsylvania, Food and Water Watch said that more than 30 water systems — primarily sewer — have been sold off since the passage of the 2016 law.

Another dozen or so local governments are currently considering offers, according to Jennie Shade, senior director of government relations with the Pennsylvania Municipal Authorities Association, which represents the special purpose districts that oversee public services and is seeking to protect local oversight.

Shade’s group estimates that completed acquisitions?are costing?ratepayers $70 million to $85 million?annually?in higher water bills, and pending sales could double that amount.

“We’re seeing buyer’s remorse in a lot of communities,” she said. “Pennsylvania has become ground zero for the commoditization of our precious public water supply.”

Since the beginning of this year, Food and Water Watch has tracked 31 water or wastewater systems nationwide that have been purchased by private companies or have a pending sale proposal. All but three are in states with fair market value laws on the books. Thirteen are in Pennsylvania.

Kocher, with the National Association of Water Companies, said many of the communities that sold their systems would have faced rate increases anyway to pay for overdue maintenance needs. Community activists said water companies’ rate hikes far exceed repair costs.

“We were told that without a sale, our rates would go up 78% to fund $12 million of infrastructure improvements,” said Pete Mrozinsi, a co-founder of the group in New Garden Township that opposed the sale to Aqua Pennsylvania. “After the sale, our rates went up 85% with no infrastructure improvements.”

Requests for comment from Aqua Pennsylvania and its parent company, Essential Utilities, were directed to a spokesperson with an outside communications firm, who was unable to arrange an interview by publication time.

Opposition grows

Activists in Pennsylvania say communities are starting to see the risks of privatization offers. Municipal officials in Bucks County, Newberry Township and Williston Township rejected purchase offers after significant local opposition.

State Sen. John Kane, a Democrat, made his living as a plumber but had never heard of the sewer privatization movement until he was elected in 2020. He learned that the city of Chester, which is in bankruptcy, was considering selling its water system for $410 million.

Kane said other communities in his district have seen rate hikes as high as 100% after selling off their water systems, and he’s joined local residents in opposing the Chester sale. He also has introduced legislation to repeal the state’s fair market value law.

“This is a junk accounting tool that games the system for private water companies to acquire infrastructure and profit off of basic human needs,” he said.

Kane’s bill has been stalled in the Consumer Protection & Professional Licensure Committee, which is chaired by Republican state Sen. Patrick Stefano. According to data collected by the government transparency group OpenSecrets, Stefano has received $13,500 in campaign contributions from water companies or their officials since 2014.

Stefano did not reply to a request for comment. House Speaker Joanna McClinton, a Democrat, did not respond to a request for comment, while staffers for Senate Majority Leader Joe Pittman, a Republican, said he was unavailable to connect for an interview.

OpenSecrets has tracked nearly 3,700 donations made by water companies or their associates to Pennsylvania candidates, totaling almost $2.7 million.

Activists won a legal battle earlier this year when the Pennsylvania Commonwealth Court overturned the state Public Utilities Commission’s approval of a sewer sale in East Whiteland Township. The court ruled that regulators had failed to show any public benefit of the sale.

Some activists think the court decision, if upheld by the state Supreme Court, could help dismantle the privatization push by forcing regulators to acknowledge its toll on ratepayers.

Jamie Lucke contributed to this story.

This story is republished from Stateline,?a sister publication of Kentucky Lantern and part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity.?