The US Senate is considering the reasons for interest rate hikes and non-renewals

In a Dec. 18 hearing of the U.S. Senate Budget Committee, finance professors and senators expressed differing views on the extent of the non-extensions and Tariff increases in home contents insurance and whether the reasons for non-renewal are due to climate change or litigation.

Robert Hartwig, clinical associate professor of finance at the University of South Carolina’s Darla Moore School of Business, testified before the committee that litigation against insurers, not the effects of climate change, is the primary cause of rate increases and uninsurance. Renewals. “The insurance industry is not in the midst of a climate-related crisis, nor is it on the verge of crashing,” he said.

Hartwig added that the increase in non-renewal rates in the U.S. is largely due to Florida California. Since non-renewal rates are not rising as much in other disaster-prone states such as Texas and New York, other issues are responsible for the increase, he added. Hartwig said “rapid population growth and urbanization, inflation, litigation and fraud” were other causes. Inflation affects the cost of building materials and the cost of repairing damage, he said. Hartwig pointed to “excessive litigation” in Florida, which accounts for 76% of all homeowners insurance litigation nationwide, even though only 7% of claims are filed in Florida.

Sen. Sheldon Whitehouse (D-R.I.), the committee’s current chairman until the Senate shifts to Republican control in the new year, presented charts of data showing a connection between climate change and concurrent rising nonrenewal rates. Benjamin Keys, a professor of real estate and finance at the Wharton School of the University of Pennsylvania, said in his response to Senator Whitehouse that looking at county-level data reinforces this connection.

“It’s very focused on the areas of highest climate risk, particularly along the coasts, but also the areas you (Senator Whitehouse) mentioned like Oklahoma and parts of New Mexico,” Keys said.

Responding to questions from Sen. Charles Grassley (R-Iowa), the committee’s ranking member, Hartwig added that reforms to individual state regulators would bring insurance carriers back into markets they had left, particularly Florida.

Also at the hearing, Ernest Shaghalian Jr., an agent with Butler & Messier Inc. Insurance in Pawtucket, Rhode Island, told Senator Whitehouse: “The problem is that consumers are being forced into risk pools, into the surplus lines.” who are forced to pay more money for insurance and the availability of optional coverage is less.”

Senator Tim Kaine (D-Virginia) spoke at the hearing about the impact of rising interest rates and non-renewals on the mortgage and real estate markets. Parts of Virginia along the coast are experiencing more frequent flooding than they did a decade ago, and the number of floods has increased, Senator Kaine said. After Hurricane Helene Parts of Virginia in the Appalachian Mountains are seeing an increase in non-renewals, he said. Senator Kaine noted that rising flood insurance costs have made it nearly impossible for some Virginia residents to sell their homes.

Following the hearing, the National Association of Mutual Insurance Companies (NAMIC) issued a press release criticizing the conduct of the Senate Budget Committee hearing. In the press release, Jimi Grande, senior vice president for federal and political affairs at NAMIC, stated: “Just days before a government shutdown, the Senate Budget Committee has failed to craft a federal budget while one in two national debts piles up on the backs of taxpayers “Instead of holding an emergency meeting on the issue, the Senate Budget Committee decides to stage an insurance crisis caused solely by climate change to score political points.”

The NAMIC release also cited inflation and litigation as causes for home insurance non-renewals and rate increases.