Image: map of cities at risk from climate change insurance death spiral. From The Hill
Saul Elbein reports for The Hill.
In short:
- Increasingly severe climate events, like hurricanes and wildfires, are driving insurance companies to raise rates or withdraw coverage, destabilizing city finances.
- Without affordable insurance, homeowners and businesses face foreclosure and asset devaluation, reducing local tax revenues and undermining critical municipal services.
- Smaller and mid-sized cities, especially those with outdated infrastructure, are particularly vulnerable to “death spirals” as climate impacts erode their resilience and financing options.
Key quote:
“Climate risk makes things uninsurable. No insurance makes things un-mortgageable. No mortgages crashes the property markets.”
— Sen. Sheldon Whitehouse (D-R.I.)
Why this matters:
As insurance companies withdraw from high-risk areas, U.S. cities may see cascading financial failures that undercut their resilience against disasters. Without systemic policy changes and investment, cities risk entering a cycle of economic decline, leaving behind vulnerable residents unable to relocate or recover.
Excerpt: ‘Anatomy of a death spiral’
In the financial death spiral feared by many experts, a local risk to overwhelmed homeowners can scale up to threaten the survival of entire cities. The spiral begins with a disaster, after which, un- or under-covered homeowners — unable to pay for the damage to their totaled homes, or unable to get the insurance coverage required to keep their mortgage — face foreclosure. Each foreclosure reduces property value and city tax revenue. Sales taxes decline as people leave or spend less — or as businesses themselves lose insurance or are destroyed.
At a certain point, this trend begins to undermine the tools that cities would ordinarily use to fight it. To rebuild infrastructure, cities can ordinarily raise money from investors by issuing municipal bonds, backed by city revenues like property and sales taxes. However, as investors begin to doubt a city’s ability to repay over the typical 30-year bond term, it can lead to higher interest rates and potential ratings downgrades from agencies like Moody’s or S&P Global.
Such a downgrade represents a life-and-death risk, particularly as a warming world brings future disasters — and the need for expensive infrastructure improvements to head them off. As mortgage and property tax rates fall, a natural response is for investors to charge more in interest to cities looking to repair damage or invest in adaptation — raising loan costs as cities need money most.
Once a ratings downgrade happens, it becomes much harder for cities to raise money for infrastructure, accelerating the spiral. For example, in 2016, Moody’s downgraded Jackson, Miss., to junk bond status due to its failing water and sewer infrastructure — a move that worsened the underlying crisis. The Moody’s downgrade meant it cost the city more to borrow money, which added $2 million to $4 million to its debt-servicing costs. That drained even more of the funds needed for infrastructure investment, contributing to the 2022 drinking water crisis.
So far, such a downgrade has yet to happen for climate-related reasons. But experts say that’s coming.
“We’ve yet to see a major ratings agency downgrade of municipal bonds issued by Miami, but we know that’s the shoe that’s going to drop at some point,” said Dave Jones.
“We MUST respect this earth - it is all we have
Claudio Dametto - South Australia
“I will always Vote to Preserve Our World.
Liam McGregor - Western Australia
“A simple message that even a politician can understand
Felicity Crombach - Victoria
“Please show you care about our future generations!!
Phil Harmer - New South Wales
“Save our world , Life & health before profits.
Kerry Lillian - New South Wales
“Close down all coal mines and Do not mine gas . Make these Companies
Daniel Johnson - New South Wales
“We want carbon free energy!
Edan Clarke - New South Wales
“Feels good to be taking a voter action step
Beaver Hudson - New South Wales
“Great Initiative. Let’s Hold elected officials Accountable to their bosses, us!
John Paul Posada - New South Wales
“We need actions not words we need honest democratic govt We need a pm
Bob Pearce - South Australia
“Thank you for this great resource. I was feeling helpless. Even this small step
Silvia Anderson - Victoria
“If political parties continue receiving political donations, we will rarely have politicians working for
Dan Chicos - New South Wales
“I only vote for people who will take urgent action to restore a safe
Susie Burke - Victoria
“Current government is not representing the opinion of the majority of Australian to meet
Neil Price - Tasmania
“We are fighting to rescue our kids' future from those who seek to steal
Vanessa Norimi - Queensland
“No time to waste Now or Never My vote is for NOW
Rosalie White - Victoria
“I am only 9 but I already care
Ava Bell - New South Wales
“From New Lambton Uniting Church - Caring for our world is a moral imperative.
Niall McKay - New South Wales
“Our federal govt is an International climate Embarrassment - its about time they stepped
Oriana Tolo - Victoria
“Vote earth this time!
Sue Cooke - Queensland
“We are in one on the wealthiest countries in the world. we have the
rowan huxtable - New South Wales
“The climate Emergency is the public health opportunity and urgent priority of the 21st
Mike Forrester - Victoria
“If they want my vote they better act now
Barbara McNiff - New South Wales
“We need to act locally now for the earth. Our only home. Vote Earth
Anne Miller - New South Wales
“I often look at the places I've known all my life and see how
Jim Baird - New South Wales
“Strike one For people power!!! Democracy might prevail outside the current cronyism that faces
Lorraine Bridger - New South Wales
“Our federal politicians Are Afraid to make action on climate change a major election
Jennifer Martin - New South Wales
“climate election, let's go!
Fahimah Badrulhisham - New South Wales
“Great to see this website that is a focus on action for climate change
Lynette Sinclair - New South Wales
“Let’s show politicians and the Murdoch media that climate change is by far the
Jane Aitken - Australian Capital Territory
“If you want to stay in power You need to take action to stop
Jane Bulter - New South Wales
“We are all that stands between terminal climate change and the vulnerable. We are
Carol Khan - Queensland
“We need a Government that Believes this is real and not taking money from
Ken Gray - New South Wales
“I'm voting for my childrens future
Anneliese Alexander - New South Wales