“Climate-related extreme weather events will become both more frequent and more violent, resulting in ever-scarcer insurance and ever-higher premiums,” a US Senate report on the insurance market warned just last month. “Climate change is no longer just an environmental problem. It is a looming economic threat.”

The big insurers – State Farm, AllState and Farmers, among others – insist they have no choice but to raise rates because of factors including sky-high construction costs and what they call “catastrophe exposure”, especially in California where they face regulatory hurdles unmatched in other states. The industry points to State Farm, whose credit rating was downgraded last year, as a casualty of these pressures.

The Guardian

“Driven by a desire to maximize profits, property casualty insurance companies … have engaged in a troubling trend of dropping California homeowners’ insurance policies like flies,” said the complaint, filed in San Diego County Superior Court. A spokesperson for Liberty Mutual declined to comment on the litigation.

The inability to get coverage is reflected in the number of policies picked up by California’s FAIR Plan, which as of September had about 452,000 policies, up from a little over 203,000 four years ago. FAIR Plan’s website says its claims exposure is nearly $6 billion in Pacific Palisades alone.

“The situation has been a train wreck coming down the track for a while,” said Rick Dinger, president of Crescenta Valley Insurance, an independent brokerage in Glendale.

Los Angeles Times

“There’s been a mass exodus of big players from the market in these parts of California,” Ben Keys, a real estate and finance professor at the Wharton School of the University of Pennsylvania, told a conference Friday.

“We’ve seen enormous non-renewals recently,” he said.

On Wednesday, California’s insurance commissioner, Ricardo Lara, announced that homeowners in areas affected by and around the fires would be protected for a year against non-renewal and cancellation of coverage.

This type of measure protected more than a million contracts in 2024.

In 1968, the coastal state set up a public insurance scheme, called FAIR, for homeowners who could no longer find a private insurer.

This “band-aid” was supposed to be temporary while people moved from one insurance policy to another, but has now expanded well beyond its intended use, lamented Keys, pointing out that its exposure had risen from $50 billion in 2018 to more than $450 billion today.

To bring companies back on board, Commissioner Lara has also initiated a reform process authorizing them to increase premiums on condition that they do not apply any geographical exclusions.

France 24

My hypothesis is that climate change will render larger and larger areas non-insurable or exorbitant. As a rule of thumb people lending mortgages require insurance for the collateral upon which the mortgage is based.  

The press I have read today suggest that many US insurers are being more argumentative already about settling claims in full. Premiums have sky rocketed and others are not offering renewals, they are dropping customers with force majeure risk.

I wonder what percentage of LA home owners have gone bareback with no insurance.

Who is going to fund the rebuild?

Perhaps many will have to sell a still smoking plot of land.

Trendy neighbourhoods may lose their trendy status if houses burn down.

Tempest Ciaran caused us around 3500 euros of damage here. The insurers were helpful and reimbursed 80%. But they made a slightly threatening sound that we should make sure that all our trees are safe and tended by experts. That this was our responsibility. We have ~100 trees. The French government allowed the insurers, by decree, to increase their premiums.

The insurance policies will get “funky” said one article. Implying complex wording and perhaps multiple small print exclusions.

There is a non-virtuous cycle, no insurance, no mortgage, no house build.

Places with the street names like Water Lane hint at flooding.

We had to, as a prophylactic, pump out our vide sanitaire, a kind of basement over the weekend. When we went to the local hardware store, the shelf which once contained water pumps was de-stocked.

Water Wind and Fire, water and wind, wind and fire.

I’ll predict that during 2025 there will be even more quasi-apocalyptic events, which will have an ever increasing impact on economies. People will be unhappy that although they live in a risk prone region, the risk materialises.

They will be upset that increasingly they cannot insure against apocalypse.