Homeowners' Insurance Changes in Coastal Virginia: Causes and consequences for shoreline communities

This study reviews the extent to which the private insurance industry may influence adaptation to climate change along Virginia’s tidal shoreline through homeowners insurance. Homeowners insurance is becoming more costly along the Atlantic Coast and coverage is changing, especially for wind damage. This year-long study by Wetlands Watch explored the private sector perceptions on sea level rise and climate adaptation, examines the specific drivers behind increasing insurance rates, and provides plausible adaptive actions in response to these increasing rates.

The study examines how changes in insurance price and availability affect adaptation measures designed to reduce the vulnerability of coastal homes to coastal storms. These adaptation measures include building code changes, structural adaptations such as installing storm shutters or hurricane strapping, elevating or armoring the home, among other approaches.

This assessment warns that increasing insurance premiums could perpetuate social inequalities. The authors expect that economic pressure would fall hardest on those with fixed or modest income, potentially causing these homeowners to sell coastal residences. As occurred in some communities devastated by Superstorm Sandy in New Jersey, increased costs could lead to the unintended consequence of gentrification along oceanfront coasts, in which homes are purchased by the wealthy or for rental properties. In other areas, where property demand is lower, the result could be a “hollowing out” of communities. This process could lower home values, reduce property taxes and public services, and make these areas less attractive.

Despite reports linking insurance company behavior to a realization of anthropogenic climate change impacts, they found no such linkage. Also, the study found no evidence that homeowners insurance could drive adaptation, at least without some significant changes in actions being taken by the insurance industry and without changes in the way that rates and underwriting are conveyed to policyholders.

In summary, it was determined that the homeowner’s insurance industry is doing little to drive adaptation at this point. "The industry has begun to make coastal living more expensive but there is no detected climate signal. It has the power to influence building codes and encourage adaptive actions to increase resiliency on individual homes, but as of now companies in Virginia are not acting to either alter building codes or incentivize adaptive actions for individual homeowners."


Publication Date: July 2013

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