Do Insurance Losses from Disasters in Other States Affect My New York Policy?

When you open your insurance renewal and notice your rates have increased, you might wonder why—especially if you haven't filed any claims. For Central New York property owners who've experienced nothing more severe than typical winter weather, it can be frustrating to see premium increases that seem to come out of nowhere.

You deserve clear information about what influences your insurance costs.

At the Horan insurance agency, we work with multiple carriers and aim to provide insights about how insurance rates respond to events across the country. As an independent agency serving Central New York, we share information about these relationships while exploring options for your coverage costs.

In this article, we'll explore how disasters in other states affect your New York insurance rates, the role of reinsurance in premium costs, and steps you might take to manage your insurance expenses.

How Natural Disasters Nationwide Impact Your Local Insurance Rates

Since Hurricane Katrina in 2005, the U.S. has seen a steady stream of costly natural disasters. From California wildfires to Gulf Coast hurricanes and Midwest tornadoes, these events create billions in insurance losses (trillions if we look as far back as the 1980s). While you might think these distant events don't affect Central New York insurance rates, the reality is more complex.

If your insurance carrier operates in multiple states, losses in other regions can influence your premiums. Here's why: When carriers face major losses in one state, they often can't recover all their costs through rate increases in that state alone. Insurance departments in each state limit how much carriers can raise rates in a given year.

The Hidden Connection Between State Insurance Regulations and Your Premiums

When a state insurance department caps rate increases—for example, allowing only a 14% increase when a carrier needs 77% to offset losses—carriers look for ways to spread the remaining costs. This often means small premium increases across all states where they operate.

Consider this local example: Even within New York State, Central New York drivers help shoulder some insurance costs from downstate regions, where accident rates and claims are higher.

While you pay less than New York City residents, your rates would be even lower if costs weren't distributed across the state. This effect extends beyond New York—major cities like Atlanta and Philadelphia also influence auto insurance rates across their carriers' coverage areas.

In fact, Central New York residents face a unique situation: we experience higher auto insurance rates due to our connection with New York City's claim patterns, while also seeing higher homeowners insurance costs when we're insured by carriers operating in disaster-prone states.

While we might only deal with issues like ice damming in winter, we can end up sharing costs with states facing hurricanes and wildfires.

How Reinsurance Affects Local Insurance Companies

You might think choosing a New York-only insurance carrier like Sterling Insurance or New York Central Mutual would shield you from out-of-state losses. While these carriers don't directly write policies in disaster-prone states, they still face indirect effects through reinsurance.

Insurance companies use reinsurance as a financial safety net. Despite their size, carriers don't keep hundreds of millions in cash reserves to pay catastrophic claims. Instead, they pay premiums to larger reinsurance companies that act as their backstop, agreeing to cover losses above certain thresholds.

When these reinsurance companies face losses from disasters in multiple states, they often increase their rates to all carriers—including New York-only insurers. These cost increases can eventually affect local policyholder premiums.

The Future of Insurance Coverage in High-Risk States

This pattern of spreading catastrophic losses across regions isn't likely to improve. As weather patterns become more hostile and disasters more frequent, carriers face difficult decisions about where they'll continue to offer coverage.

Some major insurers have already taken dramatic steps. State Farm, one of the nation's largest carriers, has pulled out of California's home insurance market and, like many major insurers, no longer writes new policies in Florida.

These market exits can create ripple effects across other states as carriers adjust their business strategies and risk exposure.

Making Strategic Insurance Choices for Central New York Coverage

You might consider these steps regarding your coverage:

1. Look into carriers that focus on fewer states, especially those less prone to natural disasters
2. Connect with an independent agent to learn about options from different carriers
3. Ask about how your carrier uses reinsurance and potential effects on rates
4. Review your coverage periodically to stay informed about available options

Working with Your Local Independent Agent

Watching your insurance costs rise due to events hundreds or thousands of miles away can feel discouraging, especially when you've maintained a clean claims record. Insurance market dynamics can be complex to understand on your own.

As your Central New York insurance agency, we share information about these market factors while looking for coverage options. We maintain relationships with multiple carriers, including both national insurers and New York-focused companies.

Click the Get a Quote button below to learn about insurance options from an agency familiar with both industry trends and local Central New York considerations.