Is the world becoming uninsurable?

American, living in area prone to natural disasters: "Is the WHOLE WORLD becoming uninsurable?"

The answer is obviously "no" since there are other parts of the world that don't live on a hurricane highway nor build houses made from firewood in an area prone to wildfires.

Not uninsurable, but buildings are going to have to become tougher.

It's happened before. Chicago's reaction to the Great Fire was simple - no more building wooden houses. Chicago went all brick. Still is, mostly.

The trouble is, brick isn't earthquake resistant. Not without steel reinforcement.

I live in a house built of cinder block filled with concrete reinforced with steel. A commercial builder built this as his personal residence in 1950. The walls look like a commercial building. The outside is just painted cinder block. Works fine, survived the 1989 earthquake without damage, low maintenance. It's not what most people want today in the US.

Like we see in California, when the government sets a price ceiling, insurance companies just leave. Same in Florida. If the free market truly was allowed run normally, the insurance rates in Pacific Palisades or on the Florida coast would be so high that no one could afford to live there. Is that a bad thing? If someone was living in a house near where they tested missiles, we'd call them crazy. At what point can we say the same about people building and rebuilding over and over in these disaster areas.

Former CEO of AXA, a major French insurer, famously announced that a world at +4°C would be "uninsurrable" [1].

That was 10 years ago.

It's true that most predictions about climate are wrong - most of the time, they're optimistic. (Not always, fortunately [2])

[1] https://www.leparisien.fr/economie/business/special-cop21-un...

[2] https://www.theclimatebrink.com/p/emissions-are-no-longer-fo...

It seems everyone is on the same "We will find new solutions to a new problem". I totally agree.

Here is a list of all new solutions we need: 1) not insure places at higher risk 2) mass desalinification 3) fix US hot climate grids sparkles and/or place them underground 4) Street corridors to isolate fires in neighborhood 5) Build with more fire-resistant materials 6) Install automated hydrant towers with cameras able to spray water on fire remotely (it's done in Spain on the edge of forests and urban areas) 7) Pass on the costs of maintaining of living in expensive risky areas to the people living there and/or give them benefits to move to unpopulated areas with no risk

1) Not all the world will suffer equally from climate change. The parts that are at higher risk should not be insurable so that new housing will not be built there but somewhere else.

2) The idea there won't be water because it doesn't rain it's ridiculous. We live on a planet literally made of water. We'll develop mass production de-salinification plants and have enough water. We need to keep investing and improving that technology. I think having water artifically priced at a low price won't help the development of the desalinification industry. So water should cost more NOW that we can afford it to reflect the R&D cost of it that we must make to have water later.

5) Hot countries don't tend to have plenty of wood to build with. Forests grow with more rain. Building with wood in Spain and Italy is very rare. LA got his wood shipped from somewhere further out. Let's build with other materials in arid fire-prone zones. Yes it's perfectly possible to have houses that are both more-fire-resistant and more-earthquake resistant.

I live in North Texas, and I see a similar pattern in home and car insurance as well. Our main local threat is hail. Well, and the tornadoes, but while very destructive, tornadoes create fairly geographically limited damage. Hail can cover whole cities at a time.

Car insurance became quite expensive. My premium is about $2,200 / 6mo (no accidents, no speeding, no claims in about 10 years) for two cars and two drivers. For some reason, 80% of people choose to park outside while they have a 2-car garage available. Usually packed with crap. They find it easier to have their cars totaled every 4-6 years.

For home insurance, my policy is almost $4,800/yr now! While making some coverage adjustments, I noticed that my insurance company no longer offers a choice of lower deductibles for hail/wind. It’s a fixed percentage relative to my property value, currently showing as nearly $15k as the cheapest option. That’s more than 50% of the replacement cost! (I know that because I had my roof replaced twice in the last 10 years.)

Every era has it's Malthusian alarmists and without fail, each has been proven wrong by exactly the same thing the author decries and says won't work this time: technological change and adaption. There's no reason to think this time will be any different. Will some places become uninsurable? Sure, plenty of places over time have become uninsurable. Will the whole world became uninsurable? Absolutely not, because we are quite good at adaptation in the face of adversity.

The issue in California is not the price of insurance, it's availability because of extremely myopic ballot initiatives that are entirely political in nature. Should insurance be fairly priced, then the market can force people out of uninsurable areas and into areas with far less chance to burn.

Judging from my experience (house built in non hazard suburb and maintained every few years), Yes.

The thing is that with the additional cost of climate change, a lot of these houses do not have the capacity to go through a once-in-100-years event, as they start to occur more frequently.

We just had a water backflow from the city main pipeline last August. Pretty much everyone was impacted, and insurance cost went up for those that were not impacted anyway.

So to make the house insurable, it requires: 1) massive city infrastructure rebuilding, and 2) everyone pays a lot more to install additional "modules" in their houses. For example I already have a backflow valve but if things get worse and water starts to accumulate close to the bottom of the house I'll need a very expensive French drain, something like 60k CAD. It's not going to break me, but it's 3-4 years of saving.

I can't imagine what happens if we get another once-in-100-years storm this summer. I'll probably leave the basement bare without floor and won't bother to claim it.

This seems like more of a commentary on a general lack of understanding of basic economics.

If things aren't priced correctly, mayhem ensues. Frustratingly the political solutions to high prices often just put off the problem. Government mandated price fixing, of insurance, rentals, etc never fixes the core problem, only allows it to fester.

Sometimes it's taxpayers losing money, sometimes it's the few unlucky ones being forced by the government - and arguably the latter is worse for everyone as private investment and services dry up because of regulatory risks.

In my NYC neighborhood, we seem to be going through a whole slew of businesses closing shop within the last year and change.

One obvious reason is rent hikes.

But as one of my favorite local bars was closing, one of the staff mentioned that insurance was really starting to kill them.

We don't live in a flood-prone part of NYC, so I'm curious: is insurance for retail space really going up dramatically across the board in NYC, or was this a single, subjective understanding of a situation?

Insurance is America’s best method of pricing externalities. If America is becoming uninsurable, maybe they should look into other methods of addressing or minimizing those externalities.

Like requiring buildings be built to a standard where they can survive normal weather events, not building in disaster prone areas, not building in sprawling huge developments that eat up a ton of natural space and create a huge urban woodland interface, and trying to slow the pace of climate change by not dumping so much co2 into the atmosphere.

Really interesting reading - looks like there's a lot of comments here along the lines of things that could be done to build more fire/flood/huricane resistant housing.

I don't want to detract away from those points, but it's definitely worth saying that, at present, we're polluting CO2 into the atmosphere at a very large and to some extent avoidable rate. Climate change is already happening, but the extent to which it happens is still down to us - we can and need to do lots to improve flood resistance in, say, Florida, but we can also stop parts of Florida ending up below sea level too.

Every year, humanity grows richer, more resilient to natural disasters, and more capable of predicting natural disasters and their negative outcomes. The point of insurance is to spread the expected burden of calamities that will affect a minority of a population to the entire population, so that those affected will have a financial safety net. This principle works regardless of how disastrous or prone to calamity a population is. If there will be more fires, more hurricanes, etc, the market will favor homes built in different locations, different architectural styles, etc in response to changing premiums and probabilities of disaster. We don't live in a world like in 1905 where an earthquake would lead to a fire that burns down an entire city. Prosperity simply requires changing to circumstances where valid.

If insurance and property taxes are proportional to property price, and property prices grow faster than incomes, then cost of ownership will eventually become unaffordable to existing residents.

A similar argument works if insurance is just based on reconstruction cost, but construction costs inflate faster than incomes.

If properties become unaffordable, then to restore equilibrium, property prices must fall, incomes must rise, or lower-income residents will sell to higher-income purchasers. If there are few higher-income purchasers, property prices will fall.

Property taxes could be cut, or decoupled from property values (e.g. poll tax), but that never happens.

If the risk really is high, there is no practical insurance available, and all purchasers are rational, then the price may go to zero.

An example of an irrational purchaser would be one who assigned high status to a beach house, even in the face of threats from coastal erosion, hurricane floods or tsunamis.

my sadly hot (no pun intended) take is that insurance needs to be let free. price controls on insurance are doubly counterproductive - not only does it result in the companies leaving, it results in those who need the insurance losing their stuff when catastrophe inevitably hits.

it’s ok if insurance is expensive - let it result in the insured goods or services having a serious price adjustment.

rather than price controls a slightly better solution would be just to nationalize insurance and force everyone to use it, but even that is not really a solution since highly correlated events are the antithesis of insurance.

The problem is that in American home-buying, insurance is often compulsory for a purchase with a mortgage. This makes sense from the bank's perspective--they want to insure their collateral. However, the system doesn't really have an answer for "what happens when their collateral becomes uninsurable?" Even though lenders have force-placed insurance, even those insurers can deny coverage in certain circumstances (e.g. flood plain). This puts insurers in a position to de-facto foreclose on not just one person's house, but swaths of houses in regions they (as an industry) deem risky.

I'm not sure what the answer is here other than forcing insurers to insure (which would raise premiums for everyone), or creating meta-insurance of some kind (insurance against becoming uninsured).

> the entire idea of being an "insurer of last resort" is based on an unlimited supply of money to fund losses that no longer make financial sense

Key insight here. Insurer of last resort == bag-holder for negative EV proposition.

Probably more that we spent decades since mass adoption of AC moving 10s of millions of people into previously lightly inhabited areas, then repeatedly bailed them out with government money to rebuild when disaster struck.

Add to that the general rich mans disease of building anything in America being slow & expensive, so each rebuild is more expensive than the last, well beyond just inflation.

Define uninsurable. In present world that means that someone will bet a lot of money nothing bad will happen to you, and you will pay them for long to keep that bet on. And that will work for that someone because the kind of bad things they give money for should be extremely rare, its like a reverse lotto. But if things become not so rare, or the unexpected rare events affect at once too much people, then becomes not so profitable for them.

But that doesn't mean that the concept may still be valid for the end user in a way or another, just that in the other end you may have a different kind of actor or mitigation of risk. That those events become far more common is not random or an act of some god, i.e. taxes for fossil carbon usage or other economic action towards those actors meant to have a fund for those cases. Or having a personal saving plan instead of giving that money to someone else, that in average may work better for most. Or force insurance companies to keep playing even when the odds are not so extremely favourable for them.

> The other way the world is becoming uninsurable is much of what we take for granted--abundant, affordable resources, products, food and fuel, for example--is not guaranteed, and cannot be insured by political or technological means.

Fuel is not guaranteed, but renewables, batteries, heat pumps, EVs and possible nuclear does increasingly give us a technological option for ensuring power.

It's fair to ask if economics will drive us to adopt these technologies on a wide enough scale before we run out.

This is silly, and overcomplicating the issue. The world is very insurable, at a price. The property and casualty business is competitive as hell in almost all parts.

The government needs to just stay out of it.

> Like virtually all problems, it's been approached as a problem with a political solution: the state or federal government can force insurers to continue offering policies that put them on the hook for additional catastrophic losses, and / or become "insurers of last resort."

When you put a minimum on the price of wages the true minimum is zero. When you put a maximum on the price of insurance the true maximum is 1/0.

It's a financial problem, ultimately. Living in Antarctica is difficult and expensive because of the conditions, but with enough money it's manageable.

California is not very hospitable on its own but with human intervention it was made liveable. But that is now running out, because e.g. the water supply is no longer adequate for what is used.

But this is the difficult situation we find ourselves in; due to climate change, hospitable areas are no longer hospitable, and while you can throw money at the problem, it becomes exponentially more expensive to continue to live there. If this continues, it will trigger a (mass) migration. This can be applied everywhere, and the phrase "climate change will trigger mass migrations" has been uttered many times already. It however feels like people only considered this to be a problem in e.g. the global south, affecting poor people because they don't have the financial means to shape the earth and their living conditions by throwing money at the problem.

I live in the Netherlands that for hundreds of years has thrown money and resources at the problem that it's below sea level and prone to flooding. We're still managing, but still get flooding in some places due to e.g. heavy rains deeper in Europe. But if the sea level goes up enough, either we'll have to spend billions in building higher sea walls... or abandon regions entirely. The worst case predictions mention a 2.5 meter sea level rise by 2100, that'll definitely test our infrastructure to put it mildly.

(this comment was a reply first but moved it to a top level one because I added my main article comment as well).

> Risks and losses cannot be extinguished, they can only be transferred to others.

At least for risks like wildfires, we can reduce future risk by rebuilding homes using wildfire resistant techniques and materials.

The problem in LA (exacerbated by the climate-change driven conditions) was that most of the burned neighborhoods were built adjacent to fire prone wildlands during an era when homes were built like matchboxes, almost designed to burn. Add the hurricane strength wind, and each building became a blowtorch.

Fiber cement siding, minimal eaves, and metal roofs are straightforward ways to reduce wildfire contagion risk of buildings. There have been numerous experiments done to demonstrate how effective this approach is at significantly reducing combustibility of buildings.

Cutting back trees near houses to create defensible space is also pretty straightforward.

I also know almost nothing about insurance other than what I've observed as a policyholder. Two things I would note though:

1) Maybe there needs to be some adjustments to how risk pooling is done. I live in Florida, so my homeowner's insurance is ridiculously expensive, but my property isn't really at risk from hurricanes etc, being very far inland. Realistically my property isn't any more at risk of anything than any property anywhere else in the country.

2) There doesn't seem to be enough flexibility in the offers. Most people seem to think insurance should cover any losses, but really people only need insurance to cover losses that they cannot recover from. I'd take a $100K deductible on my homeowner's insurance if it was offered and lowered my premiums significantly, but it's my understanding the law won't allow that.

What are we betting that the Americans rebuild in wood again? It seems like they never learn. We had a single city fire like this 500 years ago and since then we haven’t… because we built the city back in brick instead of wood.

Why don't insurance companies mandate significant fire abatement in new builds to be insurable? While it may not be possible to save every house, I wonder how many houses could have been saved with a thought behind "how can we minimize damage in a wildfire scenario"

The term "uninsurable" is not linked to "too expensive" or (equivalently) "too high risk". It's linked to "unpredictable".

The business insurances are in is a business of statistics. As long as you can model things giving you an expected value and a standard deviation, you can offer an insurance policy which gives you X amount of profit with Y amount of risk, and the insurance premiums are adjusted such that the insurance's risk for negative profit is negligible, according to the model.

What does it mean for climate change? Current insurance models apparently don't work well, so they don't dare to offer policies in certain areas. But just like city planners need to adjust (build further away from shore, higher up, build in flooding protections) and home owners do (AC, think twice if you want a basement) and farmers (choice of crops, irrigation systems), so do insurances by finding better models that allow them to have better statistics.

My expectation in the long run is that insurances will be offered again, but with so high premiums for certain areas (of high risk) that it will just be too expensive to live there. Which is fine. Nobody lives on the moon either. And the public shouldn't be paying for somebody's privilege to have a nice waterfront property in a hurricane area.

TL;DR: The current public discourse about this topic conflates predictability with cost when talking about "insurability". They are very different things.

The problem is the materials used. Greedy developers building junk homes and making bank. People in those areas are able to afford fire resistant housing but most of them are being swindled into buying stick homes. The few properly designed homes fared far better. Code needs to be updated and consumers need to be educated.

I often hear people bring up the point that wood buildings are a risk for wildfires and brick/concrete would be safer. When I did some research on this topic years ago I concluded that brick/concrete is much less stable in an Earthquake, which is also a concern for LA. Is it possible to build earthquake resistant concrete structures?

I think the best solution is to own much less.

People keep wanting to live in huge space that they barely use, then buy a fuckton of appliances they use once or twice a month at the maximum and hoard stuff like there is no tomorrow. Then they cry when they lose everything or that nobody want to insure their pile of crap. Just insure the minimum to live comfortably. It is much lower than what you can think of.

Since I have been moving every 4 to 5 years I have been focusing on never hoarding too much stuff. My appartment can burn, I will be fine and as long as I can find a small roof[1] for me and my family (1 partner 2 teenagers) and we could buy back what we need to live comfortably with less than 10k€ and then rebuild gradually to live in a normally sized[2] appartment/house.

[1] by my standards, which I rate at 20 to 25sq/m per person living in the household.

[2] a bungalow, yurt, caravan or large camper would be enough for a disaster recovery.

The graph is potentially misleading in a few ways. Population has increased, more houses to get destroyed. House prices outpace CPI. Costs went up, but so did revenue for the above reasons. Obviously those factors are independent of hurricane and fire size and frequency.

It’s hard to view insurance as a viable business when overpaying executives has become the norm. Take State Farm, for instance: its CEO was awarded $50 million in compensation over just two years — 2022 and 2023. The industry is rife with waste and high barriers to entry.

> If the state or federal government offers an open checkbook--we'll pay any and all losses, no questions asked--then those ultimately paying these astronomical bills--the taxpayers--will reasonably ask: why are we subsidizing people to rebuild in places that are clearly no longer habitable due to the probabilities of another fire, flood or hurricane?

There's two options:

1: Pay people to leave, perhaps 80% of the fair market value as of a certain date.

2: Pay people for their loss, but do not allow them to rebuild. (Unless the house is built to stricter standards, and meeting those standards might not be covered by the loss.)

I'm no insurance expert, but I know that insurance usually doesn't cover what's called force majeure — ie. "great forces" such as natural disasters. That's because insurance doesn't work if all insurees (or a large proportion) need to be compensated at the same time.

So my question is: is it even possible to insure against these events — e.g. hurricanes, forest fires, earthquakes — given that all insurance takers may need to collect compensation at once (in which case the price of a house insurance would need to be at least the same as the price of a new house).

Oh look, climate change does economic damage, but not at the source.

The answer is, of course, no. (Betteridge's law and all that)

Are there going to be massive changes in building codes? Yes. Will that make owning a building more expensive? Yes. Will the pundits tell you it is the fault of the what ever political party is in power? of course they will.

What is true is that 'pre-global warming' designed infrastructure is going to become uninsurable because it will be regularly destroyed. Once a track record is established for 'global warming aware' infrastructure, the cost to insure it will become more clear.

If you were wondering "How will global climate change effect me personally?", this is it. Your city's costs are going up as it has to rebuild itself to a new standard, if you own a home your insurance costs are going up until you tear it down (or it gets destroyed) and rebuild it to the new standard.

As long as you have population growth without increasing land , the density of people will increase and the more damage per square foot will increase.

Everything is insurable - for the right price. But if you aren't allowed to pay that price then I guess that's a problem.

Good. Building houses in tsunami-prone areas, areas downstream of large dams, and in known forest fire areas is stupid and insurance companies get to be the little boy who says "the emperor has no clothes" first.

I'm not sure I follow this: "why are we subsidizing people to rebuild in places that are clearly no longer habitable"

Does/Why would the insurance assume the subsidy is for people rebuilding in the same place? Money is fungible and so it doesn't need to be in the same place, at all. What I'd expect is that insurance for those hard-to-insure places would skyrocket and thus a new balance would be achieved.

Fire insurers could begin ploughing some of their take back into educating clients, helping them harden their homes, and making sure clients are up-to-date on fire codes. As the world changes, businesses should expect to have to remodel their product.

No it’s just that the insurance companies want mandated insurance pools for which they just receive checks.

In health insurance they don’t cover the elderly, and until Obama they did not cover people with prior conditions.

For home insurance they don’t cover flood get your are mandated to carry one if you have a mortgage.

In life insurance they do not cover you if you have a disease.

It’s more like a lottery rather than insurance.

Bloomberg recently did an excellent series on just this issue (including insurers of last resort in different states). The first part: https://www.bloomberg.com/features/2024-home-insurance-real-...

The really issue is that most people don't understand insurance.

People reduce or stop caring when they know insurance will cover things. In my opinion this leads to higher losses and higher costs. Especially when people choose more expensive things.

> That neither is a solution to the actual problem is glossed over, because as a society, we've become accustomed to the idea that there is a political solution to all problems.

THIS. I have started thinking a lot about this recently, and this isn't a lot less obvious that it sounds at first. We tend to think that, if we find _some_ consensus to fix a problem, this will be fixed. But many problems emerge now that no consensus, no matter how global, will not fix.

And even that very idea that we are a reasonable species and we will converge to some consensus-based solution isn't actually true.

I'll insure you for cost + half... it's not a matter of insurance it's the price of which it comes in at.

Everything is insurable, it's just a matter of making the premium high enough. If people are willing to pay it, that's another question.

I guess the question is how much should the rest of America have to subsidize the folks who want to live near the beach?

So let me try to put the author's argument in order:

(1) The author tried to get homeowner's insurance, but was denied because their home was a significant hurricane risk

(2) The author (maybe?) got insurance through a state-run FAIR program, but then cites news reports that these programs are close to insolvency (As are a significant amount of non-state-run homeowner insurance programs).

(3) The author is like, "well, if it's so hard to insure my house, maybe I should think about living somewhere else." And then generalizes to "a lot of places should be uninsurable and uninhabited - apocalypse here we come"