AI, Insurtechs and the Coming Wave of US Climate Migration

Plus, the Bitcoin ETF passes a milestone.

Number of the Week: $125 million (explanation below)

AI, Insurtechs and the Coming Wave of US Climate Migration

By Holly Sraeel

When the World Meteorological Organization projected in May that global temperatures would likely hit record highs in the next five years, most people—climate scientists aside—were not prepared for that probability to hit immediately.

Yet that’s exactly what happened: July is on pace to become the single hottest month on Earth on record. Extreme climate change, coupled with El Niño conditions, means that 2023 now has an 81% chance of becoming the warmest year on record. The heat is so bad that protection from unprecedented record temperatures must become a “human right,” said climate scientist Brenda Ekwurzel in an MSNBC interview.

That sentiment applies to safe shelter. Sweltering heat is causing more frequent wildfires in western states, particularly in California where residents face limited home insurance options and steep premiums. Already in crisis, insurers could soon see losses climb in Vermont, New Hampshire, Maine, and parts of Minnesota, Wisconsin, Michigan, Alaska and the Pacific Northwest because of elevated wildfire risks.

Climate change is strengthening hurricanes along the East and Gulf Coasts. Florida has been battered, prompting 13 insurers to abandon the state. These exits could spread to northeastern states if losses from severe storms and catastrophic flooding continue to pile up. A recent storm produced up to two months of rain in two days in Vermont while also drubbing parts of New York, Connecticut and Pennsylvania.

Outside of high-risk states, homeowners rarely consider the impact of climate change on insurance premiums, even in areas emerging as climate hotspots. Between 2022 and 2023, U.S. climate and weather disasters have caused $209.6 billion in damages, including severe storms ($48.5 billion), drought ($22.6 billion), flooding ($6.1 billion) and wildfires ($3.2 billion).

The mounting losses for insurers are unsustainable. Insurtechs like CAPE Analytics, ZestyAI and Kettle, all based in California, are using AI- and machine learning-driven analytics to give insurance companies the ability to more precisely model climate risks, predict the likelihood of losses, and accurately price and underwrite property and casualty (P&C) policies.