Insurers of last resort are becoming critical due to climate-related stress on private markets. Using policy-level data, we show such insurers pass costs of climate disasters through both premiums and claim rejections. Following disasters, premiums rise in affected and unaffected areas, while rejections increase in unaffected areas. Spillovers depend on price sensitivity: less sensitive pay higher premiums, more sensitive face higher rejections. Premiums (rejections) increase during financially constrained (unconstrained) periods. Households respond by increasing insurance against disasters while accepting smaller risks. Welfare analysis shows rejections are critical in redistributing costs. Disasters force even government-backed insurers to act like profit maximizers.