California needs to get rid of its price controls on insurance, so that people building in high risk areas are exposed to the true costs of the risks they are taking, and have appropriate incentives to build to the conditions.
https://www.taxfairnessproject.org/map only has it for the Bay Area, but Zillow and the county tax assessor websites can show for any address — it’s public record.
More exploration can be done here https://www.officialdata.org/ca-property-tax/#34.04626347956...
It is the government that picks up the bill in real disasters I suggest everyone reads the fine print on their contracts.
This creates larger, systemic risks and is simply unfair. Someone in Montana should not have to pay to rebuild homes in California.
We shouldn't be back stopping the insurance costs for anyone. If they can't pay it, maybe that tells them something about the place they are choosing to live in.
Are Montana residents' taxes currently paying for rebuilding homes in California? How does that work - I actually don't know but I thought FEMA doesn't rebuilt homes?
https://en.wikipedia.org/wiki/California_FAIR_Plan
However if you look at the "Key Statistics" fact sheet, you'll see that, guess what:
>The FAIR Plan’s Highest Wildfire Exposures
>This map shows the five areas with the highest wildfire exposure concentrations each in Northern and Southern California. Each quarter circle represents a 7-mile radius where risk is concentrated.
https://www.cfpnet.com/key-statistics-data/
Pacific Palisades is one of many cities where a wildfire would bankrupt the entire system, because the plan didn't actually charge people what the actual cost of replacement value of the homes is. The system apparently has about $700M in assets, and it is predicted to have over $7B in exposure right now.
I think it's pretty clear that they're going to have California tax payers bailout the system so that people living in the best real estate all of CA rebuild their homes in a place where people probably shouldn't be building in the first place, and continue to have their insurance subsidized by normal folks who could never afford to live in places that valuable.
Fascinating (and thanks for sharing all that info), but I still don't see how this money would be coming from Montana residents.
The existing precedent is the National Flood Insurance Program.
https://en.wikipedia.org/wiki/National_Flood_Insurance_Progr...
Is this an interesting comment to make? Yeah... the tax payers foot the bill because like we elect the representatives to maintain the government.
> Someone in Montana should not have to pay to rebuild homes in California.
Is this a joke? Should I, as a Californian, also be able to say "oh, my tax money? You damn well not send it to Montana to help subside program XYZ that doesn't help me."
Montana receives way more Federal aid per capita than California. So it's fair to say that Californians shouldn't be paying for road maintenance in Montana.
Besides Montana receives tax payer money from the people living in those California mansions.
CalFAIR is the state insurer of last resort but last I checked it's not subsidized. There were talks of needing a possible bailout last year, and it's going to intensify now, but it hasn't happened yet.
This is all a moot point though: you cannot force companies to offer insurance. If regulations prevent them from offering policies at a profit, they just leave. Which is exactly what is happening in California (and Florida): every company is bailing out and refusing to renew policies.
In insurance the problem is even worse, because you can’t compute what a reasonable profit cap is. Because of tail risks, you often see insurance companies making a profit of $1b each year for 30 years, then suffering a loss of $40b. Looked at during the typical year you might conclude the profits are excessive, but over a long term it might become apparent that the average profit is actually zero or even negative.
As is often the case, more competition and better competition policy is the solution.
Insurance is an industry with great cashflow. They should be able to keep any profits they make off of investing the premiums, but not the premiums themselves. The incentives just do not line up, they siphon off the money and scream about over regulation before they need to get bailed out.
Or an insurance company that went bankrupt?
Insurance companies are already highly regulated (especially in CA). There are regulations around how much money has to be held in reserves to pay claims. There are regulations around what investments can hold reserves in.
Hell in CA, there are regulations around how premiums can actually increase and a mechanism for returning “excess premiums” back to policy holders.
In fact those regulations are one of the reasons insurers are leaving CA. They can’t increase premiums sufficiently to cover risk.
You can read all about them: https://www.insurance.ca.gov/01-consumers/130-laws-regs-hear...
Yes. There were 6 insurance companies that went bankrupt in Florida in 2022. I am surprised you didn't know insurance companies go bankrupt all the time due to mismanagement.
https://news.climate.columbia.edu/2022/11/03/with-climate-im...
Insurance should not be used as a profit source. It is antithetical to the purpose of insurance.
Regardless, the Florida examples are eligible for FIGA insurance that covers claims that insolvent insurer can’t.
Money spent to repay loans or to make reserves are not profits.
I’d really argue that for-profit insurance companies are a bad idea in general, but that’s a higher-level debate. There’s an interesting idea where governments handle all disaster-related insurance handling but are then also able to have a more comprehensive approach to management (though that’d be hard to trust in the current US political climate).