Insurers brace for impact as NOAA predicts above-average hurricane season
Government scientists on Thursday released a forecast for the 2025 hurricane season, predicting a 60% chance it will be an above-average season.
The National Oceanic and Atmospheric Administration, or NOAA, predicts this season will bring 13 to 19 named storms with winds 39 miles per hour or higher. It predicts six to 10 of the forecasted storms will grow to hurricane status, and three to five will become major hurricanes.
Laura Grimm, the acting administrator of the NOAA and a marine scientist, sidestepped specific questions about how budget cuts aimed at climate science would affect the organization's work and highlighted the vital work of the agency to help communities prepare and save lives.
"Weather prediction, modeling and protecting human lives and property is our top priority. So we are fully staffed at the hurricane center, and we definitely are ready to go," Grimm said in a news conference held in Jefferson Parish, Louisiana, to commemorate 20 years since Hurricane Katrina.
Grimm also pointed out, thanks to improvements in the science and technology over the last 20 years, that NOAA's hurricane prediction was spot-on last year.
Hurricanes Helene and Milton caused more than $37 billion in insured losses in 2024, according to a report from Aon.
Despite those losses, the U.S. property casualty insurance industry saw its best underwriting performance since 2013, according to a report from the Insurance Information Institute and Milliman.
But the report concludes that January's devastating wildfires in California and economic challenges related to tariffs could dampen the industry's results in 2025.
Insurers and reinsurers are collectively facing more than $50 billion in losses from the Los Angeles wildfires.
The Midwest has also suffered outbreaks of severe thunderstorms with damaging hail, wind and tornadoes this spring. The Storm Prediction Center had tallied 883 local tornado reports this year as of Monday, 35% higher than average for this time of year.
Aon said the severe convective storms have caused an estimated $10 billion in insured losses in the first quarter. A storm over three days in May added another estimated $7 billion to insurers' tally.
The last 10 years have averaged more than $33 billion annually in insured losses, a 90% increase from the previous decade.
It's an existential threat to the insurance industry and its ability to provide affordable insurance to homeowners, according to Bill Clark CEO of Demex, a reinsurance analytics group. And the problem is getting worse, not better.
"Reinsurance (insurance for insurance) costs for severe convective storm losses are at a 20-year high and, coupled with limited availability, it is leaving insurers hamstrung and unable to transfer most of their mounting losses, " Clark said in an email to CNBC.
Whether hurricanes, wildfires or severe storms. Aon blames the skyrocketing losses on growing exposure, meaning more people are living where climate risks are higher and the cost of their homes, cars and all the stuff inside is more expensive.
The insurance industry is working to push state and local efforts to build resiliency and improve mitigation efforts — meaning better building codes, public works projects that protect homes and properties, and tough standards on defensible spaces around buildings, for instance.
The president of Jefferson County Parish, Cynthia Lee Sheng, pointed to all the efforts made in the 20 years since Hurricane Katrina hit Louisiana, killing 1,392 people in 2005. The government overhauled levees, flood walls, and pumping stations.
"It's estimated that $13 is saved for every $1 spent on mitigation efforts," Sheng said. "Hurricane Katrina also changed the face of disaster recovery. Key agencies have learned to work together to provide assistance, coordinate efforts and ensure efficient response."
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Bob Passmore, the department vice president of personal lines at the American Property Casualty Insurance Association, agreed: "It's really important to review your policy at least annually, and this is a good time to do it." Insurers often suspend policy changes and pause issuing new policies when there's a storm bearing down. So acting now helps ensure you have the right coverage before there's an urgent need. Here are three things to consider about your home insurance policy going into hurricane season, according to experts. First, take a look at your policy's limits, which represents the highest amount your insurance company will pay for a covered loss or damage, experts say. You want to make sure the policy limit is correct and would cover the cost of rebuilding your home, Passmore said. Most insurance companies will calculate the policy limit by taking into account the size of your home and construction costs in your area, said Nyce. For example, if you have a 2,000 square foot home, and the cost of construction in your area is $250 per square foot, your policy limit would need to be $500,000, he said. You may risk being underinsured, however, especially if you haven't reviewed your coverage in a while. Rising building costs or home renovations that aren't reflected in your insurer's calculation can mean your coverage lags the home's replacement value. Repair and construction costs have increased in recent years, experts say. In the last five years, the cost of construction labor has increased 36.3% while the building material costs are up 42.7%, the APCIA found. Most insurance companies follow what's called the 80% rule, meaning your coverage needs to be at least 80% of its replacement cost. If you're under, you risk your insurer paying less than the full claim. Take a look at your deductibles, or the amount you have to pay out of pocket upfront if you file a claim, experts say. For instance, if you have a $1,000 deductible on your policy and submit a claim for $8,000 of storm coverage, your insurer will pay $7,000 toward the cost of repairs, according to a report by NerdWallet. You're responsible for the remaining $1,000. A common way to lower your policy premium is by increasing your deductibles, Passmore said. Raising your deductible from $1,000 to $2,500 can save you an average 12% on your premium, per NerdWallet's research. But if you do that, make sure you have the cash on hand to absorb the cost after a loss, Passmore said. Don't stop at your standard policy deductible. Look over hazard-specific provisions such as a wind deductible, which is likely to kick in for hurricane damage. Wind deductibles are an out-of-pocket cost that is usually a percentage of the value of your policy, said Nyce. As a result, they can be more expensive than your standard deductible, he said. If a homeowner opted for a 2% deductible on a $500,000 house, their out-of-pocket costs for wind damages can go up to $10,000, he said. "I would be very cautious about picking larger deductibles for wind," he said. Floods are usually not covered by a homeowners insurance policy. If you haven't yet, consider buying a separate flood insurance policy through the National Flood Insurance Program by the Federal Emergency Management Agency or through the private market, experts say. It can be worth it whether you live in a flood-prone area or not: Flooding causes 90% of disaster damage every year in the U.S., according to FEMA. In 2024, Hurricane Helene caused massive flooding in mountainous areas like Asheville in Buncombe County, North Carolina. Less than 1% of households there were covered by the NFIP, according to a recent report by the Swiss Re Institute. If you decide to get flood insurance with the NFIP, don't buy it at the last minute, Nyce said. There's usually a 30-day waiting period before the new policy goes into effect. "You can't just buy it when you think you're going to need it like 24, 48 or 72 hours before the storm makes landfall," Nyce said. "Buy it now before the storms start to form." Make sure you understand what's protected under the policy. The NFIP typically covers up to $250,000 in damages to a residential property and up to $100,000 on the contents, said Loretta Worters, a spokeswoman for the Insurance Information Institute. If you expect more severe damage to your house, ask an insurance agent about excess flood insurance, Nyce said. Such flood insurance policies are written by private insurers that cover losses over and above what's covered by the NFIP, he said.
