Losing a Game of Risk

FROM HURRICANE-DRIVEN floods that roared down valleys in western North Carolina last fall to terrifying wildfires earlier this year in Los Angeles and Maui in 2023, it feels like deadly and destructive natural disasters now lurk around every corner.

It’s real. The National Oceanic and Atmospheric Administration tracks billion-dollar-plus disasters, and the number and intensity have gone up compared to previous decades. We see a lot of weather-related volatility and damage where we previously didn’t, like catastrophic flooding in Asheville, N.C., or more hailstorms hitting the Northeast.

It’s multiple factors. Population has grown in places prone to disasters like coastal flooding, hurricanes and fires. And climatologists tell us, in the 150 years since the Industrial Revolution, humans have affected climate; the jury may still be out on how exactly, but we’re seeing more and more events causing great expense to homeowners, businesses and government.

If you look at individual hazards, you see some signifi cant risk like flooding near the Chesapeake Bay; but for the 15 natural hazards that FEMA tracks, we’re in pretty good shape relative to other states.

On a national scale, we’re looking at a market failure. Home insurance premiums on average jumped 27% nationwide from 2021-24, according to Insurify, and in Florida, they’re 4.6 times the national average. An insurance crisis is pending, and we can’t keep doing business as usual.

I’ve called for a new public-private partnership: the Federal Natural Hazard Insurance Corp. The federal government is able to step in and help take on catastrophic risk that companies, state governments and others simply can’t. This would be a federally chartered enterprise in the spirit of what we did for housing finance with Fannie Mae and Freddie Mac.

It would take congressional approval to establish this new federal charter—and of course, in this day and age, getting everyone to agree on something is difficult. But since the wildfires in L.A., I’ve gotten a fair amount of attention for this, and I’ve talked about it with senators from some of the states most affected.

You’d have two policies: a standard homeowner’s policy covering things like trip and fall, theft, kitchen fires. Alongside that, this new entity would issue one hazard policy for all the hazards that exist wherever you live—a price everybody would have access to. It might not be cheap, but the other option could be you don’t have insurance, period.