“We’re steadily marching toward an uninsurable future.” In a report published in April, California Insurance Commissioner Ricardo Lara admonished the industry to better account for far-reaching risks like those wrought by climate change. “The insurance sector no longer has the luxury of thinking only of the year ahead,” he wrote. “Insurance companies, regulators, and consumers all must learn to consider and prepare for the long-term.” A week ago, California’s largest insurer did just that - but perhaps not in the way Lara had hoped. State Farm announced that it will not accept any new applications for business or personal property and casualty insurance in the Golden State. The company, accounting for 20 percent of bundled home insurance policies and 13 percent of commercial policies in California, said it was facing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” It will still keep existing policy holders on its books for now, but the announcement signals that risks are growing beyond what State Farm, a company worth $131 billion at the end of 2022, can bear. Insuring property in California has been a dicey proposition in recent years. Torrential rainfall this past winter caused as much as $1.5 billion in insured losses this year. The state has also suffered the costliest wildfires in US history, including the 2018 Camp Fire, which led to more than $10 billion in losses. Human action is driving many of these risks. Real estate prices have been rising in California for decades, and populations are growing in the places most vulnerable to burning and flooding. Decades of suppressing natural fires have allowed fuel for wildfires to accumulate to dangerously high levels. Humans are also heating up the planet, lifting sea levels, amplifying downpours, and exacerbating the conditions for massive blazes. So when disasters do occur,... |