Houston property insurance is already expensive. Hurricane Beryl will make it worse.
![Mohammed Durvesh looks at the tree debris from tropical storm Beryl in front of his in Sugar Land home on Monday, July 8, 2024.](https://thumbnails.texastribune.org/1wphMVEvLXUAIhT1FUsjKHVMlAA=/850x570/smart/filters:quality(75)/https://static.texastribune.org/media/files/dabc0f0eb68c4300cfeb2937c1dbfa05/0708%20TS%20Beryl%20JB%20TT%2025.jpg)
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Houston is already one of the most expensive cities in the nation for property insurance — and that cost is only expected to grow as Hurricane Beryl and other major storms batter the Bayou City.
Insurance researchers and analysts said they expect insurers will continue to raise already high premiums and become more selective with what type of damage they cover in the wake of Beryl, adding to the burden on property owners in Houston.
While the researchers and analysts don’t foresee many insurance companies imminently pulling out of Texas — an issue facing homeowners in Florida, California and Iowa — they said the state is increasingly on a similar path. International researchers believe with high confidence that climate change will cause more hurricanes that bring higher winds and more rain.
“That means more frequent and severe hurricanes and other wind storms in Texas that will kill people, injure them, damage property and cause higher insurance payouts,” said Dave Jones, director of the Climate Risk Initiative at UC Berkeley and a former California insurance commissioner. “The insurers respond by raising prices and not renewing insurance for those most exposed or excluding coverage for wind.”
A survey of about 100 insurance companies by consumer finance firm NerdWallet found Houstonians are paying, on average, $4,400 a year to insure their homes against wind, rain, and hail. That’s more than twice the national average and the highest amount among the 20 metropolitan areas surveyed.
Insurance premiums in the Lone Star State jumped 23 percent last year, the highest increase in the country, according to an analysis by S&P Global, a financial intelligence company.
The rising cost of a basic home insurance policy could imperil the growth of Texas, which has some of the fastest-growing cities in the country, said Holden Lewis, home and mortgage spokesperson with NerdWallet.
“The state is growing really fast, but I wouldn’t be surprised if some people look at the cost of home insurance and property taxes and say, ‘Well, that place isn’t for me,’” said Lewis.
‘They are not charitable organizations’
Researchers say three things are behind the high cost of insurance in Houston: more people moving to Houston, the rising cost of rebuilding property, and the increasing intensity of storms.
Beryl, which made landfall in Texas on June 8 as a Category 1 hurricane, made history as the earliest-forming Category 5 hurricane in the Atlantic. The storm knocked out power to more than 2 million people, sent trees into numerous homes and dumped nearly a foot of rain in parts of Houston.
Despite registering as the weakest level of hurricane, Beryl is expected to cost $28 billion to $32 billion nationwide, according to forecast firm AccuWeather. Storms like Beryl can hurt the bottom line of insurers looking to turn a profit, said Debra Javeline, a political science professor at Notre Dame who studies how climate change influences homeowner risk.
“They are not charitable organizations. They are businesses,” Javeline said of insurance companies. “If we were thinking about starting a new entrepreneurial venture right now, do we think that insuring the Houston housing market is a ticket to riches? Even without detailed statistics on money in and money out, anyone paying remote attention can see that the gamble will not pay.”
Javeline said Houstonians increasingly face a difficult choice: Accept the financial risks of living in a vulnerable place or move inland to a safer, more insurable place.
Insurers reducing coverage
In addition to hiking premiums, insurers are cutting back on what’s covered under standard policies.
Jones said his research shows more Texans have to buy separate wind insurance policies because insurers won’t provide coverage for wind damage.
The Texas Windstorm Insurance Association, a nonprofit that provides wind and hail insurance in 14 coastal counties and a small sliver of Harris County, as of April managed more than 250,000 policies, a 27% percent increase from 2020.
The Texas Fair Plan Association, which provides homeowners insurance to those who have been denied coverage by at least two insurance companies, had nearly 79,000 policies as of March, a 7% percent increase from 2020.
As the cost to cover losses continues to climb across the nation, some insurance companies have exited states entirely.
In California, several major insurers, including State Farm, Farmers, and Allstate, have cut back on the number of new policies they issue or tightened underwriting standards. Major companies like Farmers Insurance and Bankers Insurance withdrew from Florida last year.
Texas may be headed in that direction, Jones said, but he added it’s too early to tell.
“Florida is much further along in this continuum, but that may be where the rest of us are going,” he said. “I don’t think we’re going to rate our way out of this problem. We need to deal with the fundamental driver of risk, which is climate change.”
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