Natural Disasters Have Caused A Global Home Insurance Crisis—How Other Countries Cope | Global News Avenue

Targeted government aid in Australia

Unlike the United States, Australia is also facing a family insurance crisis. Over the years, the country’s climate has become warm, which exaggerates the problem of its bushes and increases the intensity of tropical cyclones.

Australia’s “burden power” number of homes, or insurance, will cost more than four weeks of household income, and rose 30% in 2024 to 1.61 million. Worse, global insurers have shifted the costs of natural disasters in other parts of the world to Australian policy holders.

To address some of these issues, the Australian government has provided grants to clients, which not only helps with repairs and reconstruction, but also helps reduce insurance costs.

For example, in 2022, it implemented a Cyclone Reinsurance Pool grant, which covers the reinsurance costs of individuals and small businesses in cyclone-infected areas. Reinsurance Allowing insurance companies to spread risks between multiple companies and between policies in risky areas is often the main driver of high-price increases. The United States does not offer similar reinsurance grants.

Another grant from Australia allows for repair and reconstruction funds, so homes are unlikely to be flooded in the future.

Federal Emergency Management Agency (FEMA) Provide money and other services to Americans if natural disasters damage their homes or other personal belongings. President Donald Trump recently ordered an evaluation of the FEMA to improve the program’s “efficacy, priorities and capabilities” and proposed to eliminate the program completely.

Canada’s proposed low-cost insurance plan

Last year was the most expensive year for Canadian insurance companies on record, with hail, floods and wildfires increasing the number of claims.

In addition, inflation makes the damage to natural disasters more expensive, and this trend is unlikely to reverse. According to the Insurance Agency (IBC), the number of property damage claims for Canadian insurers has increased by 115%, and repair costs have increased by 458% since 2019.

To help its citizens, IBC plans to implement a low-cost flood insurance plan for Canadian families in high-risk areas of Canada sometime in 2025. Americans can find flood coverage through FEMA’s National Flood Insurance Program. But the plan also has increased interest rates, according to the Office of Independent and nonpartisan Government Accountability, and its discount rates may not reach the right people.

Similar to the U.S. FEMA program, Canada has given over $9 billion in CAD, or nearly $6.3 billion through its disaster financial aid arrangements for disaster financial aid to provinces and regions facing massive disasters. But critics say the plan will be better used as disaster prevention funding.

Japan rethinks housing to make disaster recovery cheaper and easier

Japan’s devastating 2011 earthquake and tsunami suffered huge losses of life and severe damage to property. Since then, the country has further updated its homes to make recovery from natural disasters cheaper.

The Japanese metropolitan area has implemented strict building regulations to ensure that cities can withstand major earthquakes. However, these regulations are not enforced on traditional housing in rural areas. This makes natural disasters even more destructive, such as the 2024 earthquake in rural areas of Isichuan County that destroyed more than 83,000 homes.

Unlike the United States, which is sought after for its high quality, older homes in Japan are often too fragile to withstand natural disasters. In addition, home insurance premiums in rural areas with older homes are much more expensive than those in newer homes.

Japan adapts to this with its unique housing culture, where new homes can only last for 30 years. These buildings can often be built cheaper, making reconstruction easier and cheaper after natural disasters.

In the event of a major earthquake, the Japanese government will also provide reinsurance for private insurance companies. This prevents the insurer from passing the reinsurance costs to customers.

In contrast, the U.S. government-backed flood insurance program NFIP has a reinsurance program that allows the government to obtain reinsurance from private insurers. Typically, adding reinsurance to external companies will increase premiums for their customers.