Are portions of the U.S. just too risky to insure?

Steve Rosenthal escaped with his life when his condo building in Florida crumbled last month and left him homeless, but he still owes more than $100,000 on his mortgage.

Rosenthal, a 72-year-old restaurant advertising executive, soon received two small insurance checks for living expenses and personal property, but he was still waiting for his big payout. He expects it to be over six figures, but it will probably go to the bank to pay off the mortgage on a condo that no longer exists.

“We’re all freaking out,” he said of survivors of the partial collapse of Champlain Towers South in Surfside. “I don’t want to dip into savings that I wasn’t supposed to touch until I’m 80.”

For Rosenthal and other survivors of the collapse, sorting out complicated insurance payouts is but one part of starting over after a catastrophic loss. And his fellow Floridians may soon be feeling the shock waves from the tragedy, as spooked insurance companies begin scrutinizing the buildings they are covering, raising rates that are among the highest in the nation or canceling coverage altogether.

The Surfside collapse, which killed at least 97 people, is causing new turmoil in Florida’s troubled insurance market, further jeopardizing a coastal housing economy that is under pressure from climate change. And it adds to growing concern among economists about a new issue in the climate crisis: whether some parts of the United States are becoming too risky to insure, at least at a cost that most people can afford.

That shift has started. Days after the collapse, insurance companies sent letters threatening to cut off coverage to older buildings that did not pass mandatory safety inspections. In California insurers have begun fleeing fire-prone areas; in other parts of the West, officials say they are seeing similar reports of insurers refusing to renew policies.

And it is not just private insurers: In April, the federal government outlined changes to the heavily indebted National Flood Insurance Program that eventually will cause some people’s premiums to rise fivefold or more.

“Coastal areas all across the Gulf and up along the East Coast could start to see very similar dynamics” to what is happening in Florida, said Carolyn Kousky, executive director of the Wharton Risk Center at the University of Pennsylvania.

It is too soon to say whether climate change contributed to the collapse of the building in Surfside. But the effects of global warming, which include extreme heat

and more moisture in the air, cause structures to deteriorate more quickly, according to Jesse Keenan, a professor at Tulane University who specializes in the consequences of climate change for the built environment.

“Climate change is actually accelerating the degradation of buildings,” Keenan said.

Florida has long been a test case for how the insurance industry responds to disasters. After Hurricane Andrew devastated Southeast Florida in 1992, more than a dozen insurance companies went out of business.

Since then, the willingness of private insurers to offer coverage in Florida has waxed and waned, often in response to storms. The current market is tighter than at any point since 2003 or 2004, according to Adam Lopatin, senior vice president at USI Insurance Services. “It all comes down to profitability for the insurance companies,” Lopatin said. “And right now, writing business in Florida is not profitable.”

After massive claims from Hurricane Irma in 2017 and Hurricane Michael in 2018, insurance companies have been losing money for years, and those losses were growing. Many insurers started dropping customers in high-risk areas and refusing to take on new ones. In some parts of the state, it has become all but impossible for homeowners to buy private insurance.

As the cost of doing business went up in Florida, many insurers started expanding into other coastal states, hoping their experience with hurricanes would help them make money in places such as Louisiana, according to Joseph Petrelli, president of Demotech, a company that rates the financial health of insurers.

That strategy backfired last year, when Louisiana got walloped by five named storms, the most to hit that state in a single season.

By the end of last year, almost half of the Florida insurers rated by Demotech had to raise additional money from investors to stay afloat, Petrelli said.

Jim Gorman, CEO of American Property Insurance, said that since the building in Surfside collapsed, his company has started getting more calls from insurance brokers trying to find new coverage for clients that have either had their insurance canceled or seen their rates go up.

“I can tell just from the pickup in quote traffic that the property market in general is becoming much more restrictive,” Gorman said.

The shift since the collapse in Surfside comes on top of private insurers who were dropping homeowners. In April, Tim Weldon got a letter from his insurance company telling him it would stop covering his house in Boynton Beach once his insurance contract ended in June — just as hurricane season was starting.

Weldon, who had been in a dispute with his insurer about paying for roof damage during Hurricane Irma, has not been able to find insurance with other private companies. “It doesn’t look like anybody’s going to cover me,” he said.

As private insurers pull back, more homeowners are buying coverage from Citizens Property Insurance, a state-owned entity that was meant to be the insurer of last resort.

Now, instead of being a backstop, Citizens provides more residential insurance policies than almost any private insurer in Florida, according to state data.

For the people who lived at Champlain Towers South, any insurance payout is likely to be limited. While many residents had individual policies on their furniture and other belongings, the bigger payouts must come from the megapolicies on the building itself. Lawyers for the condominium association and its insurers have said the complex had about $30 million in property coverage and $18 million in liability coverage.

Judge Michael Hanzman of the Circuit Court in Miami-dade County, who is handling the cases filed against the building, said that $48 million “will obviously be inadequate to compensate everyone fully to the extent of their harm.”

The pot of money could grow if the land where the Champlain Towers South once stood, worth an estimated $100 million to $130 million, is sold. At a hearing Wednesday, Hanzman gave approval for a court-appointed receiver to begin the process of selling the property.

“I want you to be proceeding forward, with whatever needs to be done to monetize that property, so we can get money into the hands of these people,” Hanzman said.

Susana Alvarez, 62, who escaped the building’s collapse and is living for now in a rental, said she worries that she will not be compensated for the $150,000 in renovations she put into her unit, including a new kitchen, floors and windows.

“It’s not about what I paid to own the apartment,” she said. “It’s about what it’s worth now.”

Rosenthal has a similar worry. When he first bought his 1,560-squarefoot unit in 2001, hoping to spend the rest of his life there, he paid $250,000 for it; the unit’s reappraisal two years ago put its value at $650,000.

He would at least like to be able to pay off his mortgage, and with that in mind, he has joined one of several lawsuits against the building’s condo association. The survivors, he said, will look well beyond the building’s limited insurance policy, “suing anybody and everybody that’s involved.”