The effects of climate change on extreme weather events is requiring the insurance industry in the United States to recalculate risk assessments for various lines of insurance. From 1980 to 2005, private and federal government insurers in the United States paid $320 billion in constant 2005 dollars in claims due to weather-related losses while the total amount paid in claims annually generally increased, and 88% of all property insurance losses in the United States from 1980 to 2005 were weather-related. Annual insured natural catastrophe losses in the United States grew 10-fold in inflation-adjusted terms from $49 billion in total from 1959 to 1988 to $98 billion in total from 1989 to 1998, while the ratio of premium revenue to natural catastrophe losses fell six-fold from 1971 to 1999 and natural catastrophe losses were the primary factor in 10% of the approximately 700 U.S. insurance company insolvencies from 1969 to 1999 and possibly a contributing factor in 53%.
From 2005 to 2021, annual insured natural catastrophe losses continued to rise in inflation-adjusted terms with average annual losses increasing by 700% in constant 2021 dollars from 1985 to 2021. In 2005, Ceres released a white paper that found that catastrophic weather-related insurance losses in the United States rose 10 times faster than premiums in inflation-adjusted terms from 1971 to 2004, and projected that climate change would likely cause higher premiums and deductibles and impact the affordability and availability of property insurance, crop insurance, health insurance, life insurance, business interruption insurance, and liability insurance in the United States. From 2013 to 2023, U.S. insurance companies paid $655.7 billion in natural disaster claims with the $295.8 billion paid from 2020 to 2022 setting a record for a three-year period, and after only the Philippines, the United States lost the largest share of its gross domestic product in 2022 of any country due to natural disasters while having the greatest annual economic loss in absolute terms.
In September 2024, Verisk Analytics released an annually issued report that noted that while interannual changes in global insured natural catastrophe losses owes mostly to increased exposure (i.e. growth in the number of insurance policies sold), inflation, and climate variability rather than climate change, the report also summarized company projections that estimated that climate change increases the global average annual insured loss 1% year-over-year (in comparison to 7% that year for exposure growth and inflation), and that the impact of climate change on interannual changes could become comparable to that of climate variability by 2050 due to the former following a compound growth rate. In January 2025, the Federal Insurance Office of the U.S. Treasury Department issued a report that showed that the average home insurance policy premium in the United States rose 8.7% faster than the inflation rate from 2018 through 2022, while the average premium in the top quintile of ZIP Codes for expected annual losses to structures from climate-related perils rose 14.7% faster and the bottom quintile of ZIP Codes fell by 1.4% relative to the inflation rate.
Industry regulation
In December 2005, the National Association of Insurance Commissioners (NAIC) formed a Climate Change and Global Warming Task Force that issued a white paper in 2008 on potential insurance-related impacts of climate change to policyholders, insurers, and insurance regulators. In August 2021, the Federal Insurance Office (FIO) of the U.S. Treasury Department issued a request for information for climate-related financial risks to the U.S. insurance industry pursuant to Executive Order 14030. In February 2022, the FIO announced that it had joined the Network for Greening the Financial System. In April 2022, the NAIC announced that it would adopt a climate risk disclosure standard aligned with the recommendations of the Task Force on Climate-related Financial Disclosures. In October 2022, the FIO issued a request for comment on a proposed home and property insurance data collection aggregated at the ZIP Code level to assess climate-related impacts on insurability pursuant to Executive Order 14030.
While the insurance sector in the United States collects data on weather-related losses to inform policy pricing, insurance companies typically do not publicly disclose any detailed data on how climate risk is factored into the pricing for individual properties. In May 2023, the National Oceanic and Atmospheric Administration and the National Science Foundation announced the formation of an industry-university cooperative research center to provide the insurance industry with climate change data to improve modelling for catastrophic impacts in risk assessments of future weather conditions. In June 2023, the FIO released a report pursuant to Executive Order 14030 that found that climate risk oversight was becoming increasingly critical for state insurance regulators, and along with the NAIC, state regulators were incorporating climate risk into supervision and regulation but that most efforts remained preliminary. In November 2023, the FIO submitted the data collection request to the Office of Management and Budget for review and clearance under the Paperwork Reduction Act.
In February 2024, the Treasury Department hosted a roundtable discussion with climate and consumer organizations on climate risks and insurance markets. In March 2024, the NAIC sent letters to 400 home insurance companies requesting detailed data on policy pricing and structuring to investigate affordability and availability issues of home insurance in collaboration with the FIO. In January 2025, the FIO released a report on its data collection that found that home insurance premiums across 246 million policies provided by 330 insurers from 2018 to 2022 were 82% higher in the top quintile of ZIP Codes by expected annual losses to structures from climate-related perils than in the ZIP Codes within the bottom quintile, that nonrenewal rates were approximately 80% higher in the top quintile ZIP Codes than in the bottom quintile, and that the ratio of claims losses to premium revenue was 18% higher in the top quintile ZIP Codes than the bottom quintile ZIP Codes despite higher premiums per policy being charged.
Criticism of industry
The insurance industry has been criticized by environmental activists and Democratic Party lawmakers for continuing to provide coverage to fossil fuel companies, while Republican Party lawmakers have criticized the industry for curbing policy coverage to oil-and-gas companies (even though most U.S. insurance companies have generally refrained from doing so in contrast to insurers internationally) and for incorporating environmental, social, and corporate governance metrics into oil-and-gas company insurance policy premiums. In March 2021, U.S. Senators Elizabeth Warren, Jeff Merkley, Sheldon Whitehouse, and Chris Van Hollen sent joint letters to the American International Group (AIG), Berkshire Hathaway, Chubb Limited, Liberty Mutual, MetLife, Travelers Insurance, and other U.S. insurance companies requesting information about how each company's continued fossil fuel underwriting aligns with its stated sustainability commitments in light of the withdrawal of underwriting by more than 25 major international competitors, as well as any climate change scenarios the companies have performed on physical risks to annual premium revenue and claims expenditures and any stress tests for transition risks the companies have performed due to their fossil fuel underwriting exposure.
In June 2023, the Senate Budget Committee opened an investigation that sent letters to State Farm, Liberty Mutual, Berkshire Hathaway, AIG, Travelers Insurance, Chubb Limited, and Starr Companies requesting company documents about company underwriting and investment in fossil fuel companies and company policies with respect to Paris Agreement greenhouse gas emission reduction commitments. In March 2023, Chubb Limited announced that its insurance policies for oil-and-gas companies would require greater reductions in methane emissions for coverage, and in May 2024, Chubb Limited CEO Evan G. Greenberg criticized state governments for blocking insurers from pricing climate risk into policies, stating "Climate change is sending price signals. Society will not adjust its behavior to the change of climate just because people talk about it." By October 2021, Chubb Limited had dropped its policy coverage for the Trans Mountain pipeline, ended investments in companies that generated more than 30% of revenue from coal mining or coal-based energy production and stopped underwriting the construction and operation of new coal power plants for such companies, and was scheduled to phase out coverage to companies with existing plants above the 30% revenue threshold by 2022.
However, Chubb Limited was estimated to have received $500 million to $800 million in annual premium revenue from the fossil fuel industry in June 2023, and the Senate Budget Committee letter stated that a Chubb Limited subsidiary was linked to petroleum exploration in the Arctic by BP. In March 2022, AIG announced a carbon neutrality pledge aligned with the Paris Agreement and that it would cease underwriting coverage of new coal power plants, oil sands mining, and Arctic exploration. Nonetheless, the June 2023 Senate Budget Committee letter to AIG noted that the company received $675 million in premium revenue from the fossil fuel industry in 2021, had not restricted underwriting to any new conventional oil or natural gas development, and continued to provide coverage for the Trans Mountain pipeline. In its letters to Berkshire Hathaway and State Farm, the Senate Budget Committee noted that State Farm held more investments in oil and natural gas projects than any U.S. insurance company with at least $30.9 billion in fossil fuel investments, while Berkshire Hathaway was the largest shareholder of Chevron Corporation, Berkshire Hathaway Energy owned or had stakes in 24 coal power plants, and CEO Warren Buffett has stated publicly that climate change should not factor into the company's investment decisions.
In response to criticism about continued underwriting of fossil fuel companies, AIG and Chubb Limited argued in 2021 and 2023 respectively that complete withdrawal of coverage to fossil fuel companies would risk national energy security and that renewable energy was not yet meeting national energy demand. In February 2024, the Energy Information Administration (EIA) estimated that solar power in the United States only accounted for 4% of U.S. electricity generation in 2023 while natural gas accounted for 43%, but the EIA projected that solar power would account for 58% of new electricity generation in 2024. While criticized by OPEC and Republican Party lawmakers, the International Energy Agency (IEA) projected in October 2023 that global demand for oil, natural gas, and coal would peak before 2030. The IEA projected in December 2022 that renewable energy would overtake coal as the largest source of electricity generation globally by 2025, while the IEA projected in January 2024 that record electricity generation from renewable and nuclear power globally would absorb rising global power demand over the next 3 years from emerging markets, artificial intelligence, cryptocurrencies and blockchain technology, and data centers.