How do I project future cost?

Question

Does anyone have a good resource for evaluating long-term risk when analyzing a property?

I’m looking for tools or data sources that project insurance costs over time and climate-related risk (areas that may require flood insurance in the future or see outsized premium increases, etc)

I know I can get current insurance quotes, but I want to understand historical trends and forward-looking projections so I can better assess hold periods and identify markets to avoid based on rising premiums or climate changes.

Kevin Sobilo · Answer

@Ragan Taylor, a couple thoughts:

1. You can probably find statistics showing where climate related risks to property are likely to increase. However, you have to be careful what you are looking at.

For example, if they say that the loses in a given market are likely to rise $1 Billion in 20 years in a given market that may be because that market is urban whereas a rural market might have a smaller number. The rural market might see insurance rise MORE!

2. Risk doesn't equal insurance cost! Insurance is a competitive market, so even if risk goes up costs can remain flat or go down if there is more competition. So, if more companies come into a market the prices may go down or remain stable no matter the risk.

3. Because of #2, I suspect that you can only really get a handle on insurance price direction in the shorter term because you can assess how both the market and risk are playing out.

4. In the long term you also have no idea how legislation might affect the insurance industry. Added requirements could raise rates! Or they may make changes that also lower them. You can't predict how political winds blow over the long term IMO.