Fundamentally the goal of an insurance company is to pool risk and distribute it so that catastrophic events can be covered. These areas have too much risk (and certainty in the occurrence of catastrophic events) for the pooling to be viable.

Home owners in low-risk regions like upstate NY actually have to subsidize the solvency of insurers offering coverage in extreme-risk regions like Florida and the south.

Everyone's home insurance premiums should be lower than they actually are. Except they're not, because we have to pay to offset the cost of all the people rebuilding their houses on the Florida coast every few years.

I mean that's kind of a strong claim. Premiums are priced by risk. If insurees of one company in Florida are getting more than they pay in aggregate, then other insurance companies which correctly price the risk in NY will take all their customers.

This only holds for government insurance programs. And in that case all taxpayers are subsidizing them.

And then there is a devastating hurricane, billions to be paid by insurers. Who you think give them money to pay?

The answer is: everyone who uses home insurance all over the world. They will keep insurance companies afloat while paing billions for the damage.

> Who you think give [insurers] money to pay?

Now? The NFIP and FAIR. Which is to say all citizens.

I cant say I understand this, to me it seems like if you know the averages of claims across time will be $X, then you just sell the premium for >$X . Like it could be seemingly absurd, like if you expect to replace a house every 10 years, then you do annual premium >= ($REPLACEMENT/10) . (all averaged across the pool)

The pools can be different based on the US state and the type of insurance based on the location where the insurer is doing business. For a region where a major dangerous weather event is a certainty on a yearly basis, I (a layman in insurance) would expect the premium would approach just the full cost of replacing the property rather than being something you barely think about once a year. Hence the pricing out.

Well there’s overhead like cost of administering the claims etc etc so actually if it were literally replacing the house every 20 years the annual premium would be like house$ / 10 not 20.

But if it gets even remotely close to that point the yearly insurance is a significant portions of the house worth and it’s obviously not affordable/insurable - whatever term one wants to use.

At that point if one can’t self insure then they can’t afford the house

Part of the problem is that insurers are in the business of predicting the future, which has gotten very hard recently (global warming, cost shocks).

The other constraint is that, jurisdiction dependent, rate hikes are subject to regulatory approval.

Most importantly, the insurance industry does not make much if any money on underwriting. They make their money on investing the float, which only exists if they sell policies. That’s why insurers for the most part are ok posting slightly negative margins on their underwriting.

Disaster prone areas are uninsurable due to climate change. This is market signal to not live or build there. Some will be sad, sadness is unavoidable.

Citations:

https://news.ycombinator.com/item?id=43366311

https://news.ycombinator.com/item?id=42450680

https://news.ycombinator.com/item?id=41664750 (top comment of this thread aggressively relevant)

https://www.hbs.edu/ris/Publication%20Files/24-051_f1329bc3-...

> Some will be sad, sadness is unavoidable.

That's one way of putting it. The other way of putting it is that the affected are bearing the cost of climate change imposed on them by the rest of society, who are benefiting.

Ah yes, the climate concerned citizens of Florida. It so happens that they don't seem particularly concerned as far as macro solutions are concerned.

And seeing as my premiums have been doubling every 8 years or so, I'm assuming that cost is distributed across everybody.

Not necessarily.

A confounding factor is that construction and materials have gotten much more expensive. You aren't insured for what your house cost to build 20 years ago, you are insured for what it would cost to rebuild it after a disaster.|

The price of construction lumber quadrupled during COVID (it has since receded some), so all of a sudden the cost to frame a house went up by a significant margin, which means that the cost to insure against the future possibility of framing a house goes up too.

Can you link to one of these reports that shows a breakdown by high disaster areas?

My previous job was at an insurance company in part of the country that is not disaster prone. Even then, once in a decade hailstorms would essentially wipe out reserves and necessitate reinsurance. It would take probably 5 years to recover from the effects. You always had your fingers crossed during hail season that you'd finish the year in a position to get some bonuses. And this was a mutual insurance company, so no quarterly shareholder pressure, just long-term sustainability goals. That company would never dare expand into Florida.

Here's a white paper talking about the history of FL specifically: https://floridapolicyproject.com/wp-content/uploads/2024/05/...

You can pull the annual reports for any publicly traded insurance company if you are curious about the numbers.

Not to mention, taxpayers across the country are subsidizing federal insurance programs for people to rebuild those homes in the exact same location.

I get ties to communities. I get "socialism" - I'm all for universal healthcare.

But maybe there are limits, you get one issue. If you live in a flood zone, your house gets rebuilt, and it floods again, maybe the requirement of that insurance is relocation.

As it stands, there are people who have had their home rebuilt three times in 20 years in the same location through insurance and FEMA. I'm not saying that from the perspective of "that must be nice" - losing valuables, all the issues with flooding, are entirely horrible and unpleasant. But at what point do we as a society say "Y'know, maybe just don't build there... again."

Alternatively maybe this could be a good case for insurance funding part of the physical infrastructure to protect the houses e.g. sea walls.