During Wednesday’s Senate Banking Committee hearing, Sen. Tina Smith (D-MN) spoke about increased cost of homeowners insurance across the country.
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00:00Thank you, Mr. Chair, and welcome to all of our panelists. I appreciate this hearing this morning.
00:05I'd like to start, Mr. Chair, by asking for unanimous consent that a report from the Bipartisan Policy Center,
00:11which is about opportunities for federal action to address the rising cost of home insurance, be entered into the record.
00:17I think this is a really good contribution to our discussion, and I'd ask unanimous consent that it be included in the record.
00:24Without objection.
00:25So I'm going to focus my questions today on issues of the rising cost of homeowner's insurance and how these extreme weather events are affecting that.
00:35Homeowner's insurance is costing more and more around the country, and it is getting harder to find around the country.
00:42And the reason for this is pretty clear.
00:45Increasingly common and more and more extreme weather events, whether it's rain or hail or fire or tornadoes, hurricanes, otherwise known as climate change.
00:55So, colleagues, I have some maps here to show what's happening, and I want to just do a big thank you to Senator Whitehouse and the Budget Committee staff who've helped to put these maps together.
01:05This is an issue in Minnesota.
01:06You might not think Minnesota is not like North Carolina.
01:09Maybe you wouldn't have the same challenges, but take a look at this.
01:12This map shows that in Minnesota, working families are struggling to manage a 39% average increase in home insurance rates, which we've seen over the last seven years.
01:25And in some regions of my state, the costs have gone up even more.
01:28For example, Yellow Medicine County, which is a rural county in western Minnesota, saw premium increases of over 400% over seven years.
01:37You can see that here.
01:38And folks in some Minnesota counties are struggling to find insurance at all, and we're seeing big increases in the rates of non-renewals of insurance policies in 18 counties across my state.
01:51And all but one of these 18 counties have had a federal disaster declaration for flooding or severe storms during this same period.
02:00So this is a huge deal, of course, and it's not, of course, just a Minnesota problem.
02:05The rates of non-renewals of insurance policies has dramatically increased around the country, and especially in states represented by members of this committee.
02:16In 2023, all of these states were in the top 20 worst states for home insurance non-renewals.
02:24Louisiana, number two, North Carolina, number three, Massachusetts, number five, Rhode Island, South Carolina, South Dakota.
02:32But I could go on.
02:34This is a significant problem.
02:37And I want us just to understand that these insurance disruptions pose a systemic risk to the financial sector and to the housing market and to our state budgets.
02:48And Commissioner Pieska, I'm going to come to you in just a minute about this.
02:52This is a quote from Jay Powell in February when he came before this committee.
02:57I asked a question about this, and he answered in part that because banks and insurance companies are pulling out of high-risk areas,
03:06he said, quote, if you fast forward 10 or 15 years, there are going to be regions where you can't get a mortgage, end quote.
03:14And, of course, if this happens, this will be not just a regional or local issue.
03:19It will be a national issue.
03:20So my question, I want to come to you, Supervisor Pieska, given your experience in California,
03:28do you think that local or state governments have the capacity, are they positioned to deal with this kind of massive systemic impact
03:40if we see a loss of home insurance for families?
03:45No, not at all, and that will impact our local budgets.
03:50We get most of our revenue from property tax, and we are starting to see homes sit on the market for an extended period of time.
03:59They cannot be sold because escrow, you can't get insurance in escrow.
04:04Landlords are pulling out, my sister just lost her rental because the landlord could no longer pass through the cost of the insurance to her.
04:12So it is going to affect all of our communities.
04:15We are already seeing a high number of vacant homes in some of my HOAs in the higher fire threat areas.
04:21Even though we are doing all of this mitigation work at the local level with fire breaks, with hardening homes,
04:30we are doing as much as we can right now, and everything is on the line.
04:34We can't just sort of say, oh, the states will cover this because it's a systemic financial risk.
04:42I mean, just in a couple seconds that I have left, you've got to consider what this means in terms of your municipal bond ratings as well.
04:51Is that not true?
04:52Absolutely.
04:53Right.
04:53I wanted to just take this opportunity to raise this issue because I think that it is something,
05:00I know all of us on this committee are thinking a lot about what we can do around mitigation,
05:04and I have a question for the record which I will submit on this,
05:06but I think the systemic risk that we see because of this challenge with home insurance is something that is a big, big problem.
05:15Thank you, Mr. Chair.
05:17Thank you, Senator Smith.
05:18I feel the need whenever we have.