Millions Could Lose Insurance in Flood, Fire Areas

September 20, 2019

Imelda dropped 40 plus inches of rain on Texas with little warning. Not a hurricane, a climate pumped Tropical depression. The Future is now.

Insurance Journal:

By the time David Kaisel got back from selling his flour at a farmers’ market, a wildfire in California’s Capay Valley had burnt both his tractor and the shipping container where he kept some tools. His insurer is set to pay out a sixth of his losses.
He is now considering widening his coverage in the future to include fire insurance for his business.

Kaisel is the kind of customer making insurers rethink their approach to climate change so they can sell policies without incurring too much risk.
“I’m already accustomed to drought, but in the past year I learned first-hand the consequences of both record rainfall and wildfire,” Kaisel said. “I’ll certainly consider insuring against environmental risks when my cash flow permits.”
Other natural disasters such as wildfires, flash floods and hail have become increasingly costly for the industry, even though they were traditionally seen as lesser risks and classed by some insurers as secondary perils.
How much that should cost him is something insurers are getting to grips with after years in which their main natural catastrophe focus was hurricanes and earthquakes — and global warming was mainly a concern for the future rather than the present.
Other natural disasters such as wildfires, flash floods and hail have become increasingly costly for the industry, even though they were traditionally seen as lesser risks and classed by some insurers as “secondary perils.”
From 2010 to 2018, average insured losses from secondary perils were almost double those from primary perils such as earthquakes and hurricanes, a Reuters analysis of Swiss Re data showed.
While scientists are wary of attributing particular disasters to climate change, most agree it is making extreme weather more frequent or intense. Insurers, along with Kaisel and other farmers around the world, are at the sharp end.

Andrew Dessler PhD on Twitter:

Spare a moment to think about the those in the Houston region whose houses flooded AGAIN. You can think, “Hey, they ought to move.” But disasters like this can present you with some really bad options: You can try to sell, but houses that have flooded (esp. repeatedly) lose A LOT of value, so you’re going to take a beating on the sale price. Too bad if you needed that $$$ to live on, or if the sale price doesn’t cover the mortgage.

You can try to rebuild. But where does the $$$ come from? Unless you have $50K lying around, you’re not going to get your house to pre-flood condition. Should you even fix your house?
While you nod when Fox News says scientists are alarmists, you secretly know that they’re right and you’re terrified b/c they say extreme precip events are getting worse. Do you want to go through this again in a few years? Maybe you should just abandon the house and walk away.

You might get sued by your bank and your credit will be shot — good luck buying another house or car — but, hey, you’re out of that flooded dump.
This can lead to neighborhoods just evaporating …

And as always, the bad effects fall more strongly on the poor, which makes these disasters a moral as well as physical disaster. But, hey, that’s the free market in operation, right. If poor people don’t like it, they should become rich. AmIrite?

Daily Beast:

Climate experts warn that areas across the country are becoming more prone to natural disasters, putting homes at risk in more ways than one.

According to new data, over 340,000 California homeowners lost property insurance coverage between 2015 and 2018 due to wildfires that are increasing in frequency and intensity. But that’s just a sample of what’s to come.
“We’re looking at entire zones now that are just totally uninsurable,” Jesse Keenan, a Harvard lecturer who focuses on urban development and climate adaptation, told The Daily Beast.
“I see no end to the challenges for insurance when it comes to climate change,” Jason Thistlethwaite, a professor of environment and economics at the University of Waterloo, added. “Flooding is another area where you’re going to see a lack of availability and affordability.”
Thistlethwaite said we’ll soon be seeing what he calls “climate redlining.” Redlining was a practice insurance companies engaged in for decades, starting in the 1930s, when companies would outline black neighborhoods on a city map and declare them uninsurable. He believes climate change will cause many neighborhoods to be excluded from insurance policies.
Dr. Carolyn Kousky, executive director at the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania, told The Daily Beast that federal disaster aid can often be “limited or delayed,” which is one reason having home insurance is so crucial. “Many families do not have savings to repair a severely damaged home and for some, taking on debt can be burdensome or not feasible,” Kousky said. “There is really no substitute for insurance for having the needed funds quickly post-disaster to begin recovery. Unfortunately, often those who need the coverage the most are the least likely to be able to afford it.”

Fires on the West Coast, record flooding in the Midwest and the ferocious hurricanes battering the Southeast will all contribute to a significant decrease in home insurance availability. Not only is that bad news for people who are worried about being able to rebuild after a disaster—for many, it’s a threat to their ability to remain homeowners at all.
“If you’re super wealthy, you can self-insure,” Keenan said. “For others, they will no doubt be forced into an eventual foreclosure because they’re defaulting on their mortgages.”

Most lenders require a mortgage holder to insure their home in order to maintain the mortgage. If the insurance company in their area decides their neighborhood is too risky to insure, then they will lose coverage and likely default on their mortgage. If the mortgage is already paid, it may be extremely difficult to sell a house that can’t be insured.

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2 Responses to “Millions Could Lose Insurance in Flood, Fire Areas”


  1. Reblogged this on The Most Revolutionary Act and commented:

    According to new data, over 340,000 California homeowners lost property insurance coverage between 2015 and 2018 due to wildfires that are increasing in frequency and intensity.

  2. rhymeswithgoalie Says:

    It is important that the state and federal governments do not subsidize insurance. Human nature being what it is, I suspect that many trillions of dollars will be wasted by people trying to hang on to neighborhoods, towns and cities longer than they should be.

    I’ve come to perceive the cries of “We will rebuild!” or “We will defend our communities!” as the saddest signs of self-delusion.


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