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Comment by beamatronic | Hacker News Reader

I don’t think standard homeowner insurance covers floods or wildfires but otherwise you’re right.

It most definitely does not cover flood or rising water. Insuring against flood is a money loser which is why it needs to be subsidized by the government.

Insuring against floods in certain areas is a money loser. But those areas have a lot of valuable voters who can determine elections, so the politicians that cater to them by providing them taxpayer subsidies win the elections, hence taxpayer subsidized flood insurance.

If it's a money loser doesn't that just mean that it's priced too low?

Or that the existing models are not working

People won't subscribe at the real price.

Perhaps developers should have to bond new housing against floods prior to construction. Fully funded, third party bonds. Sensible locations will more or less be free.

Private flood insurance could certainly be profitable, given high enough premiums.

The obstacle to a functional flood insurance market are all the people who can't afford market premiums, who have complained to their politicians, demanding that the rest of society subsidize their property risk.

The reason why it’s not possible is that property/casualty insurance ordinarily spreads risk across a broad base whose risk is mostly indistinguishable from one another, and where the likelihood of claim is relatively low. The problem is that once you look at a flood plain map it’s easy to see whether you need flood insurance or not. And if the only people who buy the insurance are the highest risks, it makes little sense to sell it.

I disagree. Insurance -- all insurance, even high risk pools -- is fundamentally a numbers game. If the premiums are high enough, then it can be profitable; if it is unprofitable, then the premiums aren't high enough.

Typically wildfire risk is covered.

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