Democracy. A look that what challenges the property Insurance Market. Witnesses discussed the impact of rising Interest Rates, oversight of state Insurance Marketplaces and insurance providers departing california, texas and other states his hearing is on the Senate Banking housing and urban affairs committee. [background noises] [background noises] [background noises] [laughter] [background noises] the command banking housing and affairs come to order. Welcome back witnesses who have been here before and welcome colleagues and staff. The first hearing post labor day. A few Financial Decisions are more important than buying a home. Homebuyers make an investment in themselves, their families, their communities. Homebuying is an act essentially active optimism. It is also stressful. Families buying a new hole have so much to think about making sure they cover their down payment, navigating the mortgage included thing a process. Ovmoving in, getting kids set ua new school theft shall divide buying Homeowners Insurance has always been a part of that process appeared to guesstimate certainty and peace of mind but homeowners are confident their monthly Insurance Premiums will provide a backstop against the physical and financial devastation that could ensue if their largest investment is threatened by increasing number of Natural Disasters i turned out, hurricane, wildfire or other dangers or incidents or accidents. Knowing they are covered can help homeowners sleep better at night. Where that is how it is supposed to work increase in the home owner except face surprise when its time to renew their policies. Homeowners who spent years making their payments regularly without fail are shocked to find their insurers have raised costs, has limited coverage or too many cases will not renew the policy at all but insurers have abandoned in some cases entire markets leaving consumers with fewer options that cost more and provide less coverage. Consumers are counting on their insurers now more than ever. According to noaa since the beginning of the year the country has experienced 15 weather disasters each resulting at losses of more than 1 billion. Fifteen weather disasters costing more than a billion dollars. Reinsurance estimated severe storms resulted in 34 billion with a b of insured losses the first half of this year alone the highest ever in a six month. No reason to think those numbers wont keep going up with Climate Change. Why, florida, vermont extreme weather events appended millions of americans lives at last months terrific deadlyr wildfires in our state tragically killed at least 115 people with hundreds more missing protect projected losses of 6 billion loss in Hurricane Idalia plowed through florida, georgia, parts of the carolina last week could reach 20 billion et cetera so welch and sanders sent a letter to the Ranking Member to center scott and me ahead of this hearing detailing the loss vermonters have suffered from devastating floods this summer. Higher insurance rates could at the very homeowners land or who could least afford them and has hit them hard so often its the residents, we know that in disaster after disaster it is the lowest income residents communities of color through and pushed into the areas mostin vulnerable to Natural Disasters. As weather patterns continue to change because of Climate Change, risk and exposure will extend to places if not previously been prone to natural catastrophes. This has led Insurance Companies to reevaluate not just on the coast. Ahead of the association said there is no place now there is no place to hide from the severe Natural Disasters. An abrupt tread companies restricting coverage or raising rates or deductibles in some cases they leave states or geographic areas out entirely. Secretary yellen recently noted the threat resulted in a protection gap increasing cost limiting options for families increasing Financial Stability concerns across the financial system. U. S. Reinsurance rates the cost of insurance by elvis is spreading out risks reportedly increase up to 50 these jumps in reinsurance have been driven in part by frequent more severe Natural Disasters for themselves for their investors appeared higher reinsurance rates means higher cost for Insurance Companies which then meet price hikes passed on to consumers left millions of americans paying more for Homeowner Insurance often less protection than before others scramble to find any insurance at all because their insurance has refused to renew the policy. Allstate stopped writing me a Home Insurance policies for the whole state. Both sides of the growing risk of catastrophe and spiking reinsurance rates as factors in their decision. Not to be outdone in florida since 202616 severe storms and hurricanes have caused more than 100 billion worth of damage and led to an exodus of insurers. Farmers insurance became the fourth in florida alone and sure to exit the market during Bankers Insurance and tour insurance, lexington insurance, announced in july which stopped writing property insurance policies in that state. 100,000 floridians are looking for new coverage. Days later aaa announced it would notot renew some high exposure policies of the state despite the fact the average yearly Homeowners Insurance premium in florida cost 6000, the highest in the country. Fourteen Insurance Companies have either left the state or entered the receivership process. Insurers exiting state market select homeowners and businesses with no choice to seek a coverage frombu statemandated insurers of last resort which provided barebones policies provide barebones policies at typically higher rates. Insurers of last resort are obviously exactly that they are the last resort. That used to meet the insurers that a small share of policies. But his climate exposure has increased especially coastal states but everywhere have been battered. Insurers of last resort are growing in florida for example florida citizens the states and insurer of last resort is a state single largest property insurer. 1. 4 billion policies california insured resort to plan has been to see more than 100 increase in policies the last five years. Through the thousand policies they end of last year. Its not only homeowners hit by rising cost is shrinking coverage and that Multi Council report several issues for multifamily sector. Higher rates and deductibles. Coverage limitations and some cases no viable private market Insurance Coverage option at all. Each insurance policy is a contractor for the Property Owners and the insured sgt of the interest operating coverage for part consider community or state. Portland owners told to stay clear tread renters on by the burden when its passed on to them with higher rents. Homeowners to small supply of affordable apartments serving the lowest income renters may be increasingly left with impossible choices. Todays witnesses understand the unique challenges facing homeowners and Property Managers ms. Noris from columbus the capitol my home state of ohio sing a problem of rising insurance costs firsthand across the manyin states or National Church residents provided Affordable Homes for america seniors. I am pleased to have all three of you here today. To explore these importantex topics Ranking Member scott welcome too. Thank you, mr. Chairman i thank you all for joining us today for such an important conversation about state of insurance and states around the country. The Important Role that insurance plans and the ability for homeowners specific as we discussed today to transfer the risk to an Insurance Company. As you would imagine coming from South Carolina thinking about my friends in florida and georgia and North Carolina, thinking about the devastation of the fires in maui. My prayers and thoughts are certainly with those folks whors have lost family members who have seen their lives devastated, their properties destroyed. So much attention is given to the challenges of the environment, climates, but too often what we see is the demand made disasters that jeopardize insurance in those states. Think about the fact that in my lifetime as an adult i spent 20 plus years of the Property CasualtyInsurance Business i do have an affinity for terms that s. We use when i was in business, mike have you ever been insurance . Rex boy have i provides mike was also in church and Insurance Agency owner as well. What things we would both talk about is the probable maximum loss coded your Insurance Company calculate accurately or even in the range of reality what is the probable maximum loss within a market . Whether that is the charleston area we are prone to hurricanes or state of california or ohio with storms and or other Natural Disasters. Can a company predict the loss that will be incurred. It could absorb that cost based on the premium base charge per policyge. When you cannot, you do not stay in the market. It is kind of that simple. Insurance companies have the file the basic rules of economics like any other business thats one of the challenges that we see. Particularly in states like california and florida. Californias overregulated market makes it very difficult for Insurance Companies to make a profit. When you cant make a profit you dont say in those states. Thats one of the reasons the state farm aig the Insurance Company sustained living markets because their rates is impossible to get there. Then the inability to find a path forward. Whether it provides reduction of that risk or as i have discussed before the necessity of us get her arms from the catastrophic c occurrences from coasttocoast. Whether its a hurricane, earthquake, flood, or tornadoes. We have not really wrestled with the actual damages done by catastrophic occurrences across the country. Youre on the coaster frankly itself with this louisiana or South Carolina we account for half of all the premiums going and it f and ip. My flight happens in new york, new jersey, ohio, the policyholders there never heard of thought of a Flood Insurance policy parts of their drug money out of an account without putting any resources in the account. We have real challenges we should identify and understand and appreciate. That every Insurance Company is wrestling with today but think about this in california and florida. The two things come to mind one states you have a burdensome marketplace that is oppressive that drives business outlets not just Insurance Companies fling the state of california. Every other business that can find a place to go seems to be looking for different market. So i understand that part of florida part of the challenge we see is the environment is challenging. Certainly Natural Disasters are challenging but with only 9 of the policies homeowner policies and the countries they represent about 79 of home owner insurance losses. Over the last decade companies in florida paid out 51 billion. However, 71 of that goes to attorneys fees. Something is broken in the market. Its not the homeowner that is receiving the resources it is the lawyers because of the challenges in a broken state as it relates to the litigious environment that is apparent, obvious and clear in florida. So whether its california or florida we need to understand holistically the challenges these Insurance Companies face s phobic pull out the market. I would love to hear experts today t solutions, opportunities to recalibrate markets and for us to have a panoramic view of how to keep Insurance Companies viable as a market. Because without any question homeowners today are desperately looking for opportunities to afford the coverage i think the chairman suggested earlier the average premium for a house, 1700 for homeowners for the same policy in florida it is 6000. That is the case its not simply a case of great sufficiency based on a probable maximum loss of a Natural Disaster. It has to do with the 51 billion paid to attorneys that have to be factored in to the new definition of sufficiency thats going to be really hard to meet if that environment does not change. Think you said its got all introduced todays witnesses. Doug keller as a director Insurance Consumer federation of america. Serves as a member of the Treasury Department federal Advisory Committee insurance members the california automobile assigned Risk AdvisoryBoard Member Executive Committee and californias coalition against insurance fraud. Welcome. Schulte north executive Vice President of Strategic Partnerships national troop church is the largest provider of senior housing. She serves as chair of the board of directors for the stewards of affordable cap housing for the future of the board of directors of the corporation support housing and a past president board member of the sustained well Affordable HousingManagement Association, welcome. Jury is the director of finance insurance and trade policy program at the street institute. Prior to joining our street director of Insurance Research and multiple roles and ensuring welcome. Please begin thank you brick works good morning mr. Chairman senators im deco director of insurance for consumer can federation of america there are several forces. The property insurance crisis that has arrived and many parts of the country and is in brewing and others i will highlight what consumers are dealing with. The underlying drivers of the crisis and thought max about insurers and Property Owners can Work Together to reduce costs, improve coverage and build safer homes and more resilient communities. I in 2022 americans spent about 125 billion for Home Insurance. Its raising 40 faster than inflation since 2017. For many around the country bank upwards of 500 per month just for the basic Home Insurance. Me add more if they need to do things by separate flood, earthquake or windstorm policy. Thats a bracelet regions exposing the worst climate risk of being hit hard in this market. But this is a national problem. In fact some the highest prices are the midwest with tornado and hail risk. Neighborhoods most vulnerable to climate disasters are home to communities of color and low income americans amplify the crisis for them. Its not just geography tardiness communitys. All but a few states insurers penalize homeowners that they just have a greatin credit scor. Even if they have not filed a claim. People of color and rural americans adding more pressure on the premiums that are arty boiling over due to Climate Change. Now the second part of the crisis is Insurance Company deciding to walk away from long served communities some states entirely. Since everyone of the mortgage s required to maintain coverage people want protection for the most valuable asset this is an incredibly scary situation. What makes people so angry though the insurers for years i have told them the neighborhood is fine and insurable and they always collected the premium for companies who take their chips off the table without warning and walkways unacceptable of the resisted calls for climate risk analysis for years. As a result rethink many more people forced into the state insurance providers of last resort which silly high price policy with often bare bones coverage our people cant make the payments they end up being forced to place into expensive coverage by their Mortgage Company. For this we are hearing more and more people simply cannot afford to own a home because they cannot get insurance. The third problem is a hollowing thehollowing out of coverage pee can afford. Rather than working in partnership with the policyholders and communities to reduce the risk of loss due to climate disasters, Insurance Companies are selling policies with less rebuilding benefit. More exclusions and higher deductibles. Companies are reducing their own risk, sure. That does not change the actual cost of disaster risk it transfers it back to homeowners, renters, farmers and other consumers. So why is this happening question what their two key drivers of the crisis.