What the Collapse of Climate Insurance Means for American Communities
For decades, the U.S. housing market and the broader economy rested on an invisible but essential assumption: when disaster strikes, someone will pay to make it right. Insurance would rebuild homes. FEMA would step in with relief. The real estate market would bounce back.
But as climate disasters multiply and intensify, that foundational promise is starting to crack — and for some communities, it’s already broken.
In places like Fort Myers and Punta Gorda, Florida — once symbols of the American dream — “For Sale” signs now blot out the street names. Prices have plummeted by over 35% in the last year alone, and buyers are vanishing. Why? Because insurance, the lifeblood of mortgage-backed homeownership, is collapsing under the weight of risk.
David Burt, founder of DeltaTerra Capital and one of the real-life voices behind Michael Lewis’ Book, The Big Short, sees this for what it is: another bubble. “This is a problem of overvalued assets,” he warns. “When things correct, you could see it feeling like the Great Financial Crisis in those markets.”
He’s not alone. A recent article in The Times quoted Jeffrey Gitterman, an early climate-focused investor, calling this moment “The Great Repricing.” His forecast? As insurance costs skyrocket in flood zones, fire corridors, and drought-stressed regions, up to 20% of U.S. homes could lose 20–40% of their value within five years. That’s not just market correction — that’s the erasure of generational wealth.
What’s driving this collapse isn’t just the frequency of disasters — it’s the math. Insurers, facing spiraling claims, are hiking premiums by as much as 38% in places like California or exiting entire markets. Even then, experts say insurance rates are still underpriced by $30 billion a year nationwide. That gap is unsustainable. Without sufficient revenue to cover future claims, the house always loses.
But when insurers lose, so does everyone else. No insurance means no mortgage. No mortgage means no buyer. The result? Families stuck in stranded assets. Communities hollowed out. Local tax bases eroded. A cascade effect that’s systemic in nature.
At a recent hearing to approve emergency rate increases, a state attorney in California compared the crisis to the Titanic: “If we don’t [turn the ship], three million Californians are going into the water — and there are not enough lifeboats.”
We need to stop bailing water and start building better boats.
Community resilience can no longer be an afterthought. Risk reduction, climate adaptation, and proactive land management aren’t just environmental policies — they’re financial ones. Every dollar spent on mitigating wildfire or flood risk today saves multiples in avoided losses tomorrow. More importantly, it keeps communities livable, homes insurable, and markets functioning.
The cost to prevent a wildfire is 5% to 7% of the cost of fighting the fire. Furthermore, the total cost — including public health issues and longer term economic impact is typically 8 times the payout from the aggregate insured losses from a wildfire.
Today, Federal disaster aid is overwhelmed. Insurers are retreating. And capital markets are watching closely.
This is what a climate-driven market failure looks like: cascading financial pain that extends far beyond the disaster zones themselves. The reckoning is not theoretical. It’s here — and it’s accelerating.
The only question now is whether we’ll invest in resilience before the next domino falls.
Athena can show organization where catastrophic wildfire is possible and likely in the next 12 months.
If you, the reader, lives in a community focused on resiliency and energy security, you probably have a municipal or coop utility. Please reach out to the leadership and suggest they check out our writing for utility leadership on Energy Central.
Athena Intelligence is a data vendor with a geospatial, conditional, profiling tool that pulls together vast amounts of disaggregated wildfire and environmental data to generate spatial intelligence, resulting in a digital fingerprint of wildfire risk.
Our primary clients are electric utilities, especially municipal utilities, community owned cooperative electrical companies and community aggregators. Athena’s geospatial intelligence incorporated into multiple products that can be accessed through an online portal.
Athena’s data is currently used in wildfire mitigation plans (WMP) and public safety power shutoffs (PSPS), Community Wildfire Protection Plans (CWPP), Risk Spend Efficiency reporting to PUCs and other stakeholders.
You can reach out to me at Elizabeth@AthenaIntel.io and follow us on LinkedIn.
