As the latest climate-related crisis unfolds in Los Angeles, the U.S. Department of the Treasury released a report showing that homeowners insurance is becoming more costly and harder to procure for millions of Americans as the costs of climate-related events pose growing challenges to insurers and their customers alike.

The report, by the Treasury's Federal Insurance Office, is based on a comprehensive snapshot of the homeowners insurance market, including more than 330 insurance companies covering more than 246 million homeowners insurance policies from 2018 to 2022 (an annual average of 49.3 million policies).

Average homeowners insurance premiums per policy increased 8.7 percent faster than the rate of inflation in 2018-2022, according to the data analyzed. Some consumers faced substantially larger premium increases than the national average.

The report found that homeowners in communities affected by substantial weather events are paying far more than those elsewhere. From 2018 to 2022, consumers living in the 20 percent of ZIP Codes with the highest expected annual losses to buildings from climate-related perils paid $2,321 in premiums on average, 82 percent more than those in the 20 percent lowest climate-risk ZIP Codes.

Policy non-renewal rates also are higher in areas with the highest expected losses from climate-related perils, which indicates that consumers faced decreasing availability.

On Insurers' side, the report found that climate change is making it more costly for them to operate. Insurers' costs in 2018-2022 were higher in areas with the highest expected losses from climate-related perils. The paid loss ratio, which reflects how much insurers paid for claims relative to what they received in premiums, was highest in the highest risk ZIP Codes. These areas had a higher frequency of claims and severity of claims, about $24,000 on average compared to an average of about $19,000 for lowest risk areas.

"Treasury's analysis comes at a time of devastating tragedy, loss of life, and destruction from the wildfires in the Los Angeles area," said Secretary of the Treasury Janet L. Yellen.

"While it's far from clear what the exact financial costs of this disaster will be, it is a stark reminder of the impacts of the growing magnitude of natural disasters on the U.S. economy. Moreover, this disaster does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage - from severe storms in the Great Plains to hurricanes in the Southeast."

This report identifies alarming trends of rising costs of insurance - to consumers and insurers themselves - as well as lack of availability of insurance, all of which threaten the long-term prosperity of American families.

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