How Are Insurance Markets Adapting to Climate Change? Risk Classification and Pricing in the Market for Homeowners Insurance

This paper was previously circulated under the title “How Are Insurance Markets Adapting to Climate Change? Risk Selection and Regulation in the Market for Homeowners Insurance”. We thank seminar participants at the NBER Summer Institute, NBER Insurance Working Group, the 2023 ASSA meetings, the 2024 AERE Summer Conference, TWEEDS, Arizona State University, University of Chicago, Johns Hopkins University, Harvard University, MIT, Indiana University, Resources for the Future, the New York Federal Reserve, the San Francisco Federal Reserve, Stanford University, University of Alaska Anchorage, UC Berkeley, UC Davis, UC Santa Barbara, University of Southern California, University of Wisconsin, University of Illinois, University of Calgary, Georgia State University, and Oregon State University. We thank Josh Aarons, Kaleb Javier, and Kendra Marcoux for outstanding research assistance. We thank Benjamin Collier, Chris Costello, Mark Duggan, Penny Liao, Philip Mulder, and Joel Sobel for helpful discussions. This work received generous financial support from the University of California Office of the President Laboratory Fees Program (LFR-20-652467). Boomhower gratefully acknowledges funding via an Andrew Carnegie Fellowship from the Carnegie Corporation of New York. CoreLogic, Inc. is a source of data for this analysis. CoreLogic was not involved in the preparation of any aspect of the report. Any conclusions/interpretations of the CoreLogic data are those of the authors of the report, and not CoreLogic. CoreLogic is not responsible for any use of, nor any decisions based on or in reliance on, the CoreLogic data used in the report. CoreLogic does not represent or warrant that the CoreLogic data is complete or free from error and does not assume, and expressly disclaims, any liability to any person or entity for any loss or damage caused or resulting in whole or in part by any reliance on the CoreLogic data including, but not limited to, any loss or damage caused or resulting in whole or in part by errors or omissions in the CoreLogic data, whether such errors or omissions result from negligence, accident, or other cause. CoreLogic® is the registered trademark of CoreLogic, Inc. and/or its subsidiaries or affiliates. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• June 25, 2024