Billions of dollars of losses in Florida foreshadow the potential for climate-related economic destruction.
One result of underpricing risks is a flood of people moving to dangerous areas. According to census data, Lee County, home to Ian-devastated Fort Myers, has seen a 50% population increase since it was hit by Hurricane Charley in 2004; Miami Dade County has grown by 600,000 people since Hurricane Andrew did over $50 billion in damage there in 1992. In California, millions of people have moved into fire-prone zones since a megadrought began at the turn of the millennium.
Once upon a time, I expected the insurance industry would be the White Knight of climate change, simply because the industry relies on the proper estimation of risk. I underestimated the power of business as usual and the industry’s genius at off-loading risk.Climate change isn’t just one of many issues readers are discussing after Hurricane Ian. It’s what’s driving their discussion.
After Hurricane Andrew, for instance, the reinsurance industry began selling catastrophe bonds — so-called cat bonds — securities that paid a high interest rate for insuring a specific risk for a limited time period. Moreover, most property insurance policies are renewable on a yearly basis, which gives private insurers the option of raising rates or pulling out of a market.
Finally , after years of record losses tied to weather and climate, insurers are beginning to act as they should have done long ago. After a succession of record-breaking fires in the West, insurers have stopped offering policies in the most vulnerable areas. California has slowed this exodus by
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