Hurricane-prone Louisiana in clutches of rising climate risks: Moody’s

Escalating challenges posed by physical climate risks are increasingly impacting some states' property insurance markets, driving up premiums and the costs of claims after severe weather events.

That is according to rating agency Moody’s, which has spelled out its concerns in a new report focused specifically on the Gulf Coast state.

The hurricane-prone state, with some of the country's priciest homeowners insurance, is one of the most exposed to the problems as rising premiums, which is making property insurance difficult to afford and obtain.

Moody's also notes that extreme weather events in Louisiana, such as the destructive Hurricane Laura in 2020 and Hurricane Ida in 2021, have played a key role in the surge in property insurance rates.

Risks also exist for the state and its local governments as well, the report notes. These include lagging property values and tax collections, and population loss. At the same time, the state’s governments face rising infrastructure costs to mitigate future storm damage and a slower recovery after a storm hits.

The upshot: Louisiana faces high credit exposure to physical climate risks such as hurricanes, flooding and rising sea levels.

Adebola Kushimo, senior credit officer at Moody’s Ratings, said: “Weather events and property insurance costs can intensify financial burdens and credit risks for the state and local governments such as a revenue slowdown and population loss, particularly among working-age adults. Additionally, increasing risks of damage from extreme weather can drive up costs to build infrastructure intended to lessen storm damage.”

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