At an open session meeting of the Financial Stability Oversight Council (FSOC), Yellen noted that "some insurers have begun raising the rates for homeowners' insurance or are stepping back entirely from offering coverage in higher-risk areas" as climate disasters become more frequent and intense.
Only 60 percent of $165 billion in economic losses from such incidents were covered by insurance, said Yellen, who also chairs the FSOC.
And these climate impacts are the greatest on disadvantaged communities, she added, noting that more households are turning to residual markets for coverage or foregoing insurance completely.
"American households are already seeing the impacts even if their own homes have not been damaged," Yellen said.
Home insurance premiums in the United States have grown in the past year, driven up by rising costs of reinsurance and rebuilding materials.
"In addition to challenges to households, we must also better understand the implications of changes in property insurance for real estate markets and other financial institutions that rely on insurers to help manage risks," Yellen said.
The FSOC's members include the Federal Reserve chair, the comptroller of the currency, and the chair of the Securities and Exchange Commission, among others.
On Friday, the council also received an update on the transition away from Libor -- the London Interbank Offered Rate -- a global benchmark interest rate that has been discredited over accusations of manipulation.
The end of Libor passed on June 30 after years of preparation, according to the meeting. In the United States, it is being replaced by the Secured Overnight Financing Rate.
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