For the Wall Street Journal from Los Angeles — Climate change not only wreaks havoc on households that find themselves in the path of destructive weather-related events. It also poses potential dangers to the U.S. financial system.

Homeowners’ insurance premiums are surging as climate change is making natural disasters more severe and frequent, a Federal Reserve Bank of Dallas working paper finds. This in turn is squeezing the financial health of households throughout the country and raising their chances of defaulting on mortgages. That could jeopardize U.S. financial stability.

“Higher insurance premiums are pushing households into mortgage delinquencies” at a large magnitude, said Shan Ge, finance professor for the Stern School of Business at New York University and co-author of the recent paper published by the Dallas Fed. Researchers analyzed data from home insurance policies of 6.7 million borrowers.

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