Climate-Change Fire Sale: California Joins Florida As Uninsurable State

The insurance industry proves the existence of climate change.

The fires raging through Southern California are a jolting shock: fundamental change has to be made to the way we prepare for and respond to climate change.  

But the moves out of both California and Florida by insurance companies are capitalism’s way of saying: we don’t have a fix – you’re on your own.

This is sensible; there are many activities we have handed over to profit-making companies that have no ‘business’ providing society with a reasonable response.  Climate change as a whole needs a total-society response, as do issues like health care.  

More on health care later.

The main point is that the move by the insurance industry is a rebuttal to those who say that single weather events cannot prove the case for climate change.  Each event, they argue, is a bead rolling around in a dish.  But it the beads get strung together, they form a necklace – which is exactly what the insurance industry is now proving.

They are right to focus on the challenge.

Climate change has caused three-quarters of the Earth’s land to become permanently drier over the last three decades.  Sadly for Los Angeles County, it in included in the count.

Rain that fell in the Los Angeles area over the past few years only made things worse.  The rain led to a surge in new grass and brush, which then dried out in the seasonal drought and left extra fuel for a brush fire. 

Before the fires started, officials were warning of the risk.  The National Weather Service in Los Angeles issued a rare "particularly dangerous situation" red flag warning, advising "Use extra caution with any source of flame."  Their risk map turned out to be an accurate forecast:

 

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“Be ready to evacuate quickly, especially if in canyon, foothill, and mountain areas," it advised.

The dreaded fire started burning in the Palisades area mid-morning January 7th  and rapidly spread to Santa Monica and Malibu; others broke out near Pasadena and in the San Fernando Valley.  Powerful winds drove their progress.

California Gov. Gavin Newsom emphasised the new reality for California: "November, December, now January − there’s no fire season, it’s fire year. It’s year-round." 

The proximate cause of the infernos has not been established; they could have been caused by lightening strikes, sparks from cars, or power lines.  The main point is that California has changed over the years as its population has grown and the climate has become drier.  "Climate change is leading to larger and more severe wildfires in the western United States," according to a  National Climate Assessment report.

The reason for this assessment is that climate change has created stronger winds, less rain, higher temperatures – California’s average temperature has risen 1C since 1980 – longer fire seasons, more frequent dry falls and winters, and low relative humidity.

According to scientists global warming has contributed to a 172 per cent increase in areas torched by wildfires in California since the 1970s.  The fastest-growing wildfires have more than doubled in frequency since 2001 and caused far more destruction than slower, larger blazes.  The report added that the big culprit was “warming climate that's making it easier to burn fuels when conditions are just right.”

Estimated damage from the latest fires could reach $57 billion.  One climate change model projected up to a 77 percent increase in average area burned and a 50 percent increase in the frequency of fires exceeding 25,000 acres by 2100.

The bad news is that planetary warming is increasing faster than the climate change models can forecast.

“Models simply can’t function on the scale at which people live, because assessing the impact of current emissions on the future world requires hundreds of years of simulations,” said Zoë Schlanger in The Atlantic.

This level of uncertainty has accelerated the pull-out from the California market of major insurance companies.  Already on the edge of insolvency thanks to previous wildfires, many insurers have stopped writing new policies and dropped existing ones. The wildfires in Los Angeles’ multimillion-dollar homes areas could accelerate this collapse.  State Farm dropped nearly 70 percent of its policies in the Pacific Palisades neighborhood last year; others like Allstate, Nationwide and Travelers have cut or restricted new policies. 

This leaves California’s state-backed FAIR Plan as the go-to remaining source of insurance. The FAIR Plan had just under $6bn of exposure by September to wildfires in the Pacific Palisades area alone; it provides coverage of up to $3mn a property.

The FAIR plan, faced with rising demand, could run out of money to pay its claims.

Michael Wara, director of Stanford’s Climate and Energy Policy program and consultant to the state’s Public Utilities Commission on wildfire issues, said “We may have crossed a threshold now where we need larger measures in order to essentially create a solvent insurance system.”

A similar quandary faces the eastern tropical state of  Florida. 

In the last seven years Florida has weathered five major hurricanes. Climate-driven insurance claims in the state, which eat into companies' profits, has led many companies to leave the state the past years. In addition to those which have left the state completely, other companies have cut coverage in some parts of the state. 

A study by Blackrock, the world’s largest risk assessment company, found that 95% of global insurers believe that climate risk is an investment risk.

Like in California, Florida has turned to a non-profit organization, Citizens Property Insurance Corporation, to provide property insurance protection to people who would normally be entitled to obtain coverage through the private market but are unable to do so.  It is known as the state’s insurer of last resort.  As private companies flee, Citizens has experience massive growth, from 443,229 policies in late 2020 to more than double that amount -  1, 211,914 policies – in 2024.  Citizens grew over 65% in a single year as more and more Florida homeowners found themselves unable to buy policies elsewhere.

It has been estimated that some 39 million Florida homes and businesses are vulnerable to flooding, hurricanes, and wildfires whose risk has not been priced into their policies.

The good news is that climate change in Florida, California and elsewhere can be reversed.  The hole in the ozone layer that was threatening human health succumbed to remedial measures when every UN member state adopted the Montreal protocol in 1987 to reduce the release of ozone-depleting substances into the atmosphere.

Humans can make the big changes.

But not if they are solely motivated by profit.  They need national rules so they everyone acts in everyone’s interests.

This is the bind that California and Florida are in today.

Faced with a need for a national  -  even international – response, the states are left to their own resources to make piecemeal plans that do not even attempt to address the overriding issue of climate change -  a challenge that requires sustained commitment to ambitious emissions reductions targets. 

Approaching the issue on a state-by-state basis could lead nowhere.  Florida Governor Ron De Santis is dealing with climate change by forbidding mention of it in state law.  He has pledged to “keep windmills off our beaches, gas in our tanks, and China out of our state,” listing two things that are the real problems Floridians need to address.

California Governor Newsom is committed to reaching carbon neutrality by 2045, with more than 80 targets that will enlist the power of the land itself to reduce climate change.

President-elect Trump is blaming the fires on Newsom, saying he had refused to sign the ‘water restoration declaration’.  “There is no such document as the water restoration declaration – that is pure fiction,” said the Governor’s office.

So we have a ways to go to work together on the climate change issue.

But stranger things have happened.  Decades ago the Canadian provinces were split on the issue of healthcare, until a radical Prairie Prime Minister created a national plan.  Today Canadians pay about $2,000 in taxes to cover their healthcare costs, while Americans spend $8,000 per year on private insurance that all too often is withdrawn when needed.  America is the only industrialized nation that does not have universal health insurance.  Americans spend 18% of GDP on a system that provides the worst outcomes: lower life expectancy, lower access to care, higher suicide rates and poor quality of life.

Two-thirds of Americans think the U.S. should have universal healthcare.

I would guess that the number is as high or even higher for those supporting climate change…especially in hard-hit areas like California and Florida.

Job One for Humanity is a publicly funded, independent climate change think tank that has received accolades for its approach.  

Job One Executive Director Lawrence Wollersheim stated that “Wildfires and life-smothering smoke pollution will increase in lockstep with rising global warming. Decades ago, it was a well-predicted global warming consequence by climate scientists. Unfortunately, the wildfires and life-smothering smoke pollution you now see in Canada, the US, Europe, and Siberia will soon radically increase in frequency, severity, and size of affected areas.”

It is time to follow the lead of the non-profit organizations like Job One, and come together on a national action plan to reduce our environmental impact.

The fires of Los Angeles cannot be allowed to get worse.

We can fix this.  If we had the power to make the problem, we also have the power to solve it.

And for our friends in Los Angeles, you have our sympathy and support.

Click here or on the image below to connect California climate change wildfire victims with free resources and connections to law firms to help them get financial restitution. 

 

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