With the Caribbean just a few tenths of a degree warmer than historical norms, a supercharged Hurricane Helene ripped though the Southeastern United States causing loss of life, communities in shambles, and untold financial damages. Upon reflecting on the financial paradigm of this natural disaster, we have small, rural communities looking at hundreds of millions, if not billions, of damages in places that were sought out by some as a refuge from climate volatility.
In tracking the less noticed impacts of changes in the property insurance over the last two years, we’ve written about that industry’s changes as a leading indicator for muni credit. This storm offers clarity to the argument that muni ratings do not take climate seriously with negative implications for homeowners, bond investors and prudent policy.
“At the end of the day, homeowners are bound to their local government. For any property owner, the local government is at the center of place-based risk. The ability of a local government to respond to disasters, maintain infrastructure, and provide public services is critical to both property values and the broader economic health of the community. This is why rating agencies, as entities that influence municipal borrowing costs, have both a fiscal and ethical reason to change their behavior.”