Floridians will feel climate change effects in property insurance bills

As part of its series “The Business of Climate Change,” which highlights the climate views of business men and women throughout the state, The Invading Sea spoke with Andrew Stevenson, senior research analyst with Voloridge Investments and adviser for the VoLo Foundation.

Here are some highlights from the interview.

First of all, can you briefly explain what your company does and how it relates to climate change?

We are a hedge fund here in Jupiter, Florida. I manage a hedge fund portfolio that’s directly related to climate called the Climate Change Fund. So, we are creating strategies and making investment decisions around what is either happening to the climate today with respect to the damages of climate change or how we are trying to fix the problem over time.

How is climate change affecting the personal finances and investments of average people?

The climate itself is obviously changing pretty rapidly, and we’re seeing a lot of the damages related to climate change becoming pocketbook issues. Next year, you’re probably going to see your insurance premiums go up.

It’s a function of what happened in the last several years. One of the strangest statistics you probably haven’t heard about climate change is that about one out of every 30 buildings was affected by climate change last year in the United States.

These are insured claims. There’s more than that, clearly, because some of them aren’t insured. But if you think about that, about 4.5 million structures had some damages to report with respect to climate change, and some of those are owned by people like you and me and some of them are owned by businesses, but it translates into a more expensive premium for you, for all of us, from an insurance perspective next year, and in the years to come and something on the order of 9% to 12% next year.

Your office is in South Florida. What are some of the effects of climate change that you’ve seen firsthand?

Obviously, we’ve seen many big storms that have happened over the past several years. Those are having a pretty dramatic impact on how we live and disrupting Florida’s trillion-dollar economy. If you take a week out of that year to repair or clean up after a storm, like we saw in Texas — they had three days basically where their economy kind of ground to a halt, and it cost the economy of Texas about $100 billion in terms of total damages — it’s pretty significant.

It’s like a half-percent of U.S. GDP if you think about it in that way. It’s a big number. Florida is having similar problems, so they’re having to take all their power lines and sink them below ground so we can afford to avoid the brownouts.

And again, the big problem is in the real estate sector. I would argue that the two things from an individual standpoint to be concerned about are: how this is a pocketbook issue with respect to insurance premiums kind of driving up the cost of living in Florida, and kind of the more short-term worrying thing is really the rise in heat and how our summers are getting longer, our winters are getting shorter.

This is not good for young people, babies … in particular or older people, and that’s sort of what Florida is. We are growing young families and retired people, and when you are disadvantaging them on both ends of the spectrum, it’s not so great for the health and welfare of the economy going forward.

There’s been a lot of uncertainty around climate change and real estate. Do you think that 30-year mortgages will cease to exist because of sea-level rise and climate change?

I think the kind of stealth problem is not so much the mortgage rate but the insurance premiums. Just as an example, in 2019, the insurance industry, for every $100 they took in, they paid out about $107 in payouts for events, so they lost money in 2019.

In 2020, they took in $100 in premium and ended up having to pay out about $121. So, they’re losing money on Florida as a commercial enterprise to insure homes. So, what’s happening is that means they’re going to have to increase rates in order just to break even.

So maybe as much as we think this is a greed factor, these guys have lost money for several years now and what they’re likely to do is raise rates to a point where they are not losing money. And that is sort of a stealth tax on real estate, because if you think about a $300,000 home, if it costs you $1,000 to insure it when you purchase it, you turn around two years later it’s $3,000 to insure your home.

It’s like having your mortgage rate go up and you’re going from what you thought was a fixed rate of 2% to a variable rate, sort of, north of 4% or 5% because of this additional cost that no one wants to pay.

Kevin Mims, a Florida-based freelance journalist, is the producer of “The Business of Climate Change.” He conducted this interview with Mr. Stevenson.

”The Invading Sea” is the opinion arm of the Florida Climate Reporting Network, a collaborative of news organizations across the state.

Stevenson