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Sea Change

Sea Change Live! Inside the Insurance Crisis

Sea Change Live event
Halle Parker
Sea Change
Sea Change Live event

It started in states like Florida and Louisiana. And, now it's spreading. The home insurance market is crumbling as climate-fueled disasters increase. Premiums are skyrocketing, and already, insurance is playing a role in determining where we can live, and who can afford to live there.

So we decided to host our very first Sea Change Live event dedicated to understanding what is going wrong, and how we can fix it. And, guess what? The event sold out! Join us as we dive deep into the insurance crisis—and possible solutions—with a panel of experts.


Guillermo Franco: Head of catastrophic risk research for Guy Carpenter, an international reinsurance broker.

Haley Gentry: Senior Research Fellow at Tulane University's Institute on Water Resources, Law and Policy.

Jason Lewis: President of Noah W. Lewis and Associates, an insurance brokerage firm based in New Orleans.

Andreanecia Morris: Executive Director of Housing NOLA and President of the Greater New Orleans Housing Alliance.

Sea Change is made possible with major support from the Gulf Research Program of the National Academy of Sciences, Engineering and Medicine. WWNO’s Coastal Desk is supported by the Walton Family Foundation, the Meraux Foundation, and the Greater New Orleans Foundation.

You can reach the Sea Change team at seachange@wwno.org.


CARLYLE: Hey Halle

HALLE: Hey Carlyle

CARLYLE: So I thought we’d start by reading off some recent headlines.

HALLE: okay, hit me.

CARLYLE: alright, Here’s a few:

“Florida Homeowners Are Relocating in Droves Over Insurance Crisis”

“Louisiana’s Insurance Crisis is a Climate Crisis”

HALLE: Oh looks like there’s more. “What the Bleep is Going On With Texas Home Insurance?”

This one puts it simply: “Worst Insurance Crisis in History” … Alright then…

CARLYLE: any guess what today’s show is about?

HALLE: Insurance!

CARLYLE: You got it. Boring you say?

HALLE: Not these days. This is an issue people across the country have been thinking about, talking about, complaining about. Because insurance costs are skyrocketing. We’re talking, double, triple, quadruple, even.

CARLYLE: and that is, if you can even get homeowners insurance. Which is getting harder these days as more and more insurance companies are dropping people from coverage or altogether pulling out of risky states like here in Louisiana.

HALLE: And this is widespread. Some experts call places like Louisiana, Florida and California the canaries in the coal mine for the insurance crisis after massive - and expensive - damage from hurricanes and wildfires. But the crisis affects far more than our coastlines.

CARLYLE: Places you might not expect…recently companies have decided to even pull out of Iowa. Iowa!!

HALLE: And that’s why this spring we decided to host our very first Sea Change live event, dedicated to discussing the insurance crisis. And who da thought we’d have a sold-out show, people lining up to hear about insurance!

CARLYLE: Well, it was free.

HALLE: Ok right it was free. But the point is: insurance is top of mind here in Louisiana, and increasingly, across the country. So, what did we do?

CARLYLE: We brought in a panel of experts to join us for the event. The insurance business in the time of climate change is a tough one. Even without climate change, insurance is complicated, so there is a whole lot to figure out.

HALLE: Today on Sea Change, we are bringing our live event to you. Get ready to dig into a deep discussion about why we are in this insurance disaster in the first place, how it’s changing where we can live, and why it’s an enormous threat to our entire economy.

CARLYLE: AND, ways to fix this crumbling insurance system. . That’s coming up!


PAUL MAASSEN: Ladies and gentlemen, how about a big round of applause for our hosts this evening, Carlyle Calhoun and Halle Parker.

CARLYLE: Welcome everyone. We are so happy to have you all here for our very first sea change live event coming to you from the Broadside in New Orleans. I'm Carlyle Calhoun.

HALLE: And I'm Halle Parker. It's so great to see such a nice crowd. Um, do our panelists want to come up here? Yeah. Big round of applause for the panelists.

CARLYLE: So we decided to take on an easy topic tonight, homeowner's insurance. And just to get a sense of how much this is affecting us all here, I'm going to ask a couple questions. And if it applies to you. Please clap. No raising hands, we're doing radio. Clap, clap loudly. Okay, clap if you have homeowner's insurance.


CARLYLE: Now, clap if your rates have gone up over the past three years.


CARLYLE: That sounds like everybody. Clap if it's doubled or more than doubled.


CARLYLE: Clap if the cost of homeowner's insurance worries you.


CARLYLE: Okay, well we are worried too, but we want to leave this panel feeling like there's a path forward and a way out of this crisis. And to help us do that, we have an amazing crew here with us.

HALLE: Yes, so to our left, to our right, This very handsome, beautiful panel over here, we have to start off with, um, Guillermo Franco. He is the head of catastrophic risk research for Guy Carpenter, an international reinsurance broker, and he's been in this business for over 20 years. And you might not know what reinsurance is. It's actually the people that are insuring the insurance companies. And next, we have Haley Gentry, a senior research fellow for Tulane University's Institute on Water Resources, Law and Policy. And she's been doing a deep dive into Louisiana's insurance crisis and past policies. Jason Lewis over here. He is the president of Noah W. Lewis and Associates. That firm is here in New Orleans. It's his family's insurance company, and he's been working with clients ranging from homeowners to big businesses. And last but not least, Andreanecia Morris. She is the executive director of Housing NOLA and the president of the Greater New Orleans Housing Alliance. She's also one of the biggest advocates for affordable housing solutions in our state. So let's get into it. Guillermo and Haley have a few presentations for us just to set a baseline understanding, Guillermo, take it away.

GUILLERMO: Great to be here with all of you. So, basically the policy itself is sold by an insurer, but when the insurers sell a lot of policies, they aggregate a lot of risk, right? So they, they themselves have to seek insurance for their portfolios of, of policies. And this is called reinsurance. The concept is relatively simple when you think about it is we ourselves as individuals, we cannot take all the risk that a hurricane involves or an earthquake, right?

If we lose our house, we lose a lot. By participating in this chain, we pull our risks together. We all buy insurance that is passed to an insurance company, and by collectively paying premium, the insurance company now accumulates a pool of funds that they can use to pay a few of us when we have problems, right?

We're here in New Orleans, we're talking about hurricane risk, most probably, but, You are participating in a pool of risk together with Japanese communities who are transferring earthquake risk, communities in Indonesia who are transferring their flood risk, and so on and so forth. So at some point in this chain, the problem becomes global.

This is important to understand because when we talk about changes in the market, when we see the prices fluctuating, it is often not an only local problem. It's a, it's a global phenomenon. The fact that there was an earthquake in Japan in 2011, in Tohoku, affected the prices overall. I gave you a little bit of the context, but there are fundamentally three factors at play that are influencing a lot of this price volatility that we're seeing.

Uh, number one, and this is a scientific, uh, observation, risks are increasing in areas where there are high volatility. high populations, right? Like New Orleans, California, these risks are driven, science tells us, largely by a warming climate. So issues like, for example, increased risk of wildfire in California or Colorado, or increased, expected increased intensification of hurricanes in the Gulf of Mexico, it will put pressure on the insurance system because it will make losses potentially More frequent and larger, right?

So this is this impacts the insurance market directly. The second issue that we see is, uh, increasing interest rates or inflationary inflationary pressures. Now, why does that matter? Well, if you read your policy, right, which often we don't, but if you're If we read the policy, uh, you see that

The policy is a promise to restore you to the original state of your house, of your car and so on and so forth. Now in a world where the cost of construction is increasing very rapidly, the premiums, they just don't, Keep the pace off increasing in costs.

So that's why that is an additional pressure on increasing premiums, right? And then finally, we have an effect that we call social inflation. I'm going to give you the example of Florida because it's probably the most well known, but in Florida, um, Until recently, the laws have changed now because this was exacerbating the crisis there.

There was a condition by which, um, it was called assignment of benefits. The philosophy behind that policy was to make life simpler. For the policy holder, right? You don't have to engage in conversation with the insurer. The contractor fixes your house and they talk to the insurer, right? I think the philosophy was a positive philosophy.

However, this has basically made the claims process a bit lopsided for the insurers. They're paying now more than they expected because they have all the, all these legal pressures. So, sorry I took too long. Maybe.

HALLE: That was great. Thank you, Guillermo. Haley.

Haley: Hello, everyone. You all might have noticed earlier that when everyone was clapping about homeowner's insurance, I don't own a home and I've never had a homeowner's insurance policy. So, but I am a renter and renters are also impacted through the way that that cost gets transferred on to renters as well.

A lot of the issues we're seeing in Louisiana, and we've seen in Florida, and in California, Colorado, now Texas more so, In more and more states, after a catastrophic event, you know, sometimes the huge national insurers, if you're a smaller insurer, you might not have sufficient reserves and you become insolvent, or it may not make sense for you to write policies in that state, you know, given how much you're allowed to charge, what the regulator tells you you can do.

And so, as more companies leave the market, you have a lot of smaller insurers who might only write in Louisiana and Florida. Two very risky markets,

And as more companies pull out, that ends up kind of going to the government, ultimately taxpayers. And so we're at a really important point in time where we need to really be considering what is the government's role? What is, The federal government's role, what is your state government, what should your local government be doing for community support, because these are all things that will have to be considered as we address the private market issues.

Risk has grown so much and the risks from climate change are continuing to rise and that base level of risk is so high that there has to be consideration of the affordability question. How are we going to support homeowners and renters who otherwise won't be able to afford You know to continue living in South, Louisiana.

And so with that cheerful thought…

HALLE: Great information,

CARLYLE: I think what's what's obvious to all of us is that we would not be here tonight discussing an insurance crisis if it wasn't for climate change. In the 1980s, the U. S. experienced about three disasters a year, and that doing about a billion dollars in damage. Now we are averaging about 18 disasters a year, and just Hurricane Ida in 2021 did 75 billion dollars in damage.

So, we are dealing with a whole different situation now. So, yes, we'll keep the cheerfulness just flowing, but we will eventually talk about solutions. But not yet.

HALLE: Well, yeah, on that note, Jason and Andreanecia, I'd love to hear from you both. I mean, you both work on the ground with residents of New Orleans in different capacities.

Jason, you also work with businesses. Could each of you kind of give us a picture of what you're hearing from the people that you work with?

JASON: Absolutely. Um, we're hearing frustration. That's, that's what we're hearing. And it's understandable because, you know, insurance is a large ticket item for most households.

It already was back in 2019. Um, now it's, it's become more than some people can handle. Part of the frustration is not everyone understands what we just walked through here and All of the different factors that go into the price of your insurance. A lot of my conversations are about what do I need? How much can I reduce?

Are there types of coverage I can go without? And when you're talking about finances, sometimes you have to make those difficult decisions. But taking on more risk for someone in my profession is never a good idea. Um, but if you're going to do it, you have to do it in a way that you're educated about and that you understand the risk you’re taking on.

Even though insurance is expensive right now, without insurance, a lot of things in the economy would grind to a halt. Insurance as an industry allows individuals to take on risks. If there were no insurance, Each of us would have to keep a piggy bank full with enough money to completely rebuild our home at any time.

That would not allow you to put that capital to more productive uses. Not only that, should the big one come and you rebuild your house, you've depleted all of your reserves and now you're in a risky position all over again. So it's fun to beat up and hate insurance, but I think it's important to remember the function that it plays in society as a whole and just understanding some of the forces that are impacting these costs.

CARLYLE: And Andreanecia, I was wondering if you could tell us more about From what you're seeing how rising insurance costs are affecting affordability for housing and are you? Already seeing that change our city.

ANDREANECIA: So we've already we've been seeing this for a while This crisis started hitting renters first Because landlords started getting forced place into citizens Before homeowners did because there was always a smaller set of companies that provided insurance to landlords and renters So there was always less competition in those markets So when it started to constrict those landlords ended up in Louisiana citizens first and what we started to see in One year's time we started to see triple digit increases in monthly rent over one year, and two years, and three years, because the insurance crisis started with the most vulnerable first.

And that was the first warning shot that we didn't heed, because rent is going up. And if we think, if we're not talking about who's a fully vested citizen that can't be a renter, right, because they don't own their own property, they're stupid because they're paying somebody else's mortgage. How many of y'all have ever heard that before?

Right? And so, they're not important. They should just figure it out and buckle up and buy a house. And now, it's come for the homeowners. And so now we're seeing people, homeowners, low to moderate income homeowners, people with inherited property, people who bought their home 10 years ago, 20 years ago, with escrows that are tripling their monthly payments. And they can't afford it. We're also seeing the out migration increase. For This is all a result of the combination of these disasters and these increasing housing costs.

HALLE: Thank you for that, and wow, you've given us a lot to think about. And we actually had some great audience questions come in before the show, and we wanted to call up one person to start.

AUDIENCE MEMBER: I’m a former coastal reporter and a 38 year old renter here in New Orleans. In order to build wealth in America, we've really been taught to invest in assets, right? But even if we do have the privilege to be able to afford, A home in New Orleans right now with all of these factors that you've just laid out, like, will this long held assumption of continuing appreciation hold? Does it make financial sense, even if it makes emotional sense, to buy a house in New Orleans right now?

JASON: Um, purchasing a home is never purely financial in the first place. Yeah, it's a big financial decision, but there's going to be some emotion tied into that as well. I've reminded people that New Orleans is a very unique place.

Um, there are lots of characteristics and elements of New Orleans that are the reason people are drawn here. If you're just looking at the dollars and cents, or if you're just looking at the, the risks, the fact is, over the last five years, we've all seen how things have changed. We've all seen how quickly storms can intensify as they approach the coast. We’ve, you know, had to either evacuate or make some sort of plans to deal with the impact of the climate when we're living here in New Orleans. That being said, you know, I love this place. Uh, I don't plan on going anywhere anytime soon. Um, what we're trying to do is just make you aware that there aren't any magic secrets that are going to solve the quagmire we find ourselves in any time soon.

So the best thing we can do is educate ourselves. And if we're going to be here, we kind of strap in for the ride.

ANDREANECIA: I would push back on that a little bit because strapping in just means you're going to accept it. And if you're going to invest in this city, you need to be proactive and you need to get ready to fight.

And that's what all of us have to do, renters and homeowners. There's some real math conversations about what it would mean to buy right now, a home in this city with insurance. I know I do this work every day. People can't buy. It's not even a choice. And before this insurance crisis, it was not an option for certain people, people who made 7 and 25 cents an hour, people who made 15 an hour, you know, the people who make the city go right.

The artisans, the musicians, the hospitality workers, because it's a hospitality industry. And so how did we get here? How did we, what series of choices did we collectively make? And how did we fail to act? How did we fail to protect our neighbors and ultimately ourselves? So rather than lying back and thinking of England, I'm going to urge everybody to, to figure out how, Oh, some people will read historical romance novels.

All right. There is a battle happening and we've got to get ready for that. And we can win that battle. That's not, uh, that's not magic. That's not naive. Today. These are facts. I'm talking brick and mortars. The vacancy rate in this city is 23%. There's enough room in this city tonight for every person under the bridge, everybody you think about you pass on the street corners, tonight we can house them.

That's not magic. That's a choice we've made. And so we can make better choices. What are our leaders doing? What are you letting them do?

CARLYLE: Well, I'm fired up, but, um, Guillermo, let's take it back wide angle for everybody. Um, can you help us get a sense of how Louisiana fits into this picture nationally?

GUILLERMO: Oftentimes we, we think of insurance as our first priority. line of defense, but, but it isn't. The first line of defense is, uh, mitigation typically, right? So we need, we need to build better infrastructure to reduce the exposure we have to these natural hazards, right?

That is, uh, I think paramount. And I think we need to think more about that. We'll accomplish two objectives that are very important. One, we will reduce our risk overall, right? Because we're exposed less to these hazards. But second, we will attract more interest from insurance companies because insurance specializes on transferring the peak risks.

You know, those outliers, they cannot. Uh, take all the risks that we see every year, that, that's not sustainable, right? These are events that should be rare, otherwise insurance falls apart, right, as a, as a principle. So I think that we need to remember, you know, the place for these different, uh, interventions.

CARLYLE: And what do you, give us some examples of that.

GUILLERMO: Yeah, yeah, yeah. I'll give you an example. I, I, I remember as an anecdote, I, I was at a conference in Europe and I was talking to some colleagues who work for the government of, of the Netherlands. And we were talking about the role of insurance within their risk mitigation framework.

And as you know, uh, Holland has a lot of challenges keeping the sea away from their land, right? Uh, but they said that, uh, typically the philosophy of the government has been that every dollar they have available, they invest in mitigation rather than in insurance. If they can increase Uh, you know, there are sea walls by a centimeter.

Well, that's an investment worth doing because it reduces their potential exposure, right? All of these strategies are like different, um, tools, right, in your, in your toolbox. And there is, there is room for mitigation. And I think that should be given a lot of thought. But also there is room in some cases for risk transfer, right, which is insurance.

So how these things fit together. That needs to be worked out, uh, depending on what the needs of the community are. And it will be different here in Louisiana than it will be in California, than it will be in Spain, right? Talking about different systems, it's important to see how different countries manage their risks.

I've been living in the U. S. now for over 20 years and so I consider myself, I'm originally from Spain, I consider myself half, half Spanish and now half American. I didn't know this when I lived in Spain, but we have a great catastrophe risk pool in Spain. And, you know, we all pay a little tax on our homeowners, uh, policy.

People typically don't notice this because this is a very, you know, it's, I don't know what it is now, but it must be a few euros, right? Or, and basically this money gets pooled together. Uh, into a pot of money, and this pot of money is used to pay claims from natural disasters. So when somebody experiences an earthquake in Spain, they don't get compensated by their insurer.

They get compensated by the state fund for national catastrophes. Uh, and this has worked well. Now, uh, Will it work forever? Eh, I don't know. Eh, will it have to change? Will it have to be more expensive? I don't know. I'll give you another anecdote. Eh, New Zealand has a sim similar pot of money, right? They call it the EQC, it's the Earthquake Commission.

And in 2011, there were two large earthquakes in Christchurch, eh, they destroyed a lot of, uh, communities. And, uh, this pool of money that, if I remember correctly, held at the time about 8, 000 million dollars, uh, and they had reinsurance, so some part of this money was protected.

The U. S. at the moment does not have such an insurance pool for catastrophes as they exist in other European countries mostly

ANDREANECIA: and we we could be looking at that and Guillermo We've made some of these investments here in Louisiana, but we're not continuing them They keep moving. For example, the people in Terrebonne Parish have actually built their own levy system outside of the federal levy system They can't get FEMA to certify it even though it's built to the same standards We are actually been working on our wetlands on our coastal Protection and Restoration Agency that's about to be collapsed in and sent away, y'all.

Um, we are talking about 141 million sitting that would address flood risk in a neighborhood in New Orleans that we got from the federal government. There are billions of dollars that we got to rebuild people's houses that we didn't give to the people who needed it. So we're, you're, I'm so glad that you said that because We have the seeds of that, but we keep pivoting away from it.

GUILLERMO: Yeah. Let me, let me give you a, a another, another concept that I, I didn't know existed before, but I've learned about it in the last, uh, in, in the last year or so, and I find it extremely interesting. In the 18 hundreds, uh, few companies in New York were exhausted of, uh, being subjected to increasing premiums to insure their business. So they, they banded together and they said, well, nobody knows our business better than we do. So why, why should we be paying premium to an entity that is not supporting us and is increasing prices and doesn't know our business very well? So they created their own insurance company.

This is called a reciprocal exchange in which participants insure one another. So they're basically creating this pool that I described that exists in some countries, but they're creating it as, as private citizens, as private individuals, as private companies. I think there's going to be more proliferation for, uh, these alternative, almost cooperative forms of risk pooling.

If you know that you have reduced your risk, Because you have implemented a new wetland, because you have reinforced your mangrove forest, because you have built a levee, you know your risk better than anybody. And if you trust your analysis, then who better to insure you than yourself, right? This is an interesting concept that I think will be explored more.

As a matter of fact, there was an article in the press a few weeks ago saying that there's been filings in the U. S. for ten new reciprocal exchanges. So, you know, people are awakening. to this fact that we need all the tools we can get. So if the insurance industry can provide some products that we, that we can use and that are affordable and that are useful, then we use those.

But if we can complement those products with other forms of risk transfer or risk mitigation, let's do it.

HALLE: And Jason, I'd also love to hear from you. What are you hearing from insurance companies about what actually are the real solutions here?

JASON: Solutions aren't easy to come by. You know, when you hear people talk about market forces and letting the market decide and things like that, that's what we're living through right now.

On the global stage, individuals are starting to come to appreciate the heightened level of risk that certain locations carry, and they are pricing that risk what they feel is appropriate. When we see something like a wildfire in California and we ask ourselves, You know, why do people live in such a dangerous area?

You know, places, places outside of here are asking the same thing of us. And we're starting to see the cost of the risk. Inherent to our location being worked into the premiums that we're having to pay so they're they're not any really quick overnight solutions Now we just talked about mitigation and mitigation is a great first step It's one of the things that you as an individual can do you can You can you can harden and fortify your home to the extent possible Make it through higher sustained winds with less damage.

You can get a small reduction in your insurance premium if you have a fortified roof. Um, but more importantly than that, if we do have a storm, you're less likely to sustain some catastrophic loss of your roof. So there are things that an individual can do, but it's really going to be working around the margins.

I wish, I wish I could tell you some secret to bring your premium back to what it was. Okay. in the spring of 2020. I just don't see that happening anytime soon. So it's really going to be about taking those steps that are within your power to fortify your own home and and have some reserves for yourself.

ANDREANECIA: The Biden Harris administration is actually putting money out in the I. R. A. That could help pre weatherization and other investments in homes like that. But we got to go get that money to It's out there. The money's out there. The money is out there.

CARLYLE: And I think what all of you have hit on is what a big deal the insurance crisis is. Because we're talking about what could shape the future of where we can live and who can live there. There are ways we can get involved. One of them was joining this conversation tonight. So thank you all for being here.

And thank you to our wonderful panelists here who just enlightened us all.

Thanks for listening to Sea Change. This episode was hosted by Halle Parker and me, Carlyle Calhoun. Our sound designer is Emily Jankowski. Our theme music is by John Batiste. Sea Change is a WWNO and WRKF production. We're a part of the NPR podcast network and distributed by PRX. Sea change is made possible with major support from the Gulf Research Program of the National Academy of Sciences, Engineering, and Medicine.

WWNO's Coastal Desk is supported by the Walton Family Foundation, the Mereaux Foundation, and the Greater New Orleans Foundation. Thanks for being here, and we'll be back in another two weeks.

Carlyle Calhoun is the managing producer of <i>Sea Change.</i> You can reach her at: carlyle@wwno.org
Halle Parker reports on the environment for WWNO's Coastal Desk. You can reach her at hparker@wwno.org.