Feels tangential because a lot of these regions are borderline uninsurable right now. This is a huge problem in FL and CA.
And there is plenty that can be done to reduce the fire risk to bring premiums down.
CA is hardly the first place to have a high fire risk.
Looking to insurers—and the market generally—to solve the climate crisis is a fool's errand. We need to actually fight the causes if we want real progress.
https://www.architectureanddesign.com.au/editorial/features/...
The structures are essentially fire resistant and with appropriate local control of vegetation make it entirely possible to avoid fire loss.
Of course, but there are some markets that are unsustainable from a cost perspective, to the consumer and the provider.
> And there is plenty that can be done to reduce the fire risk to bring premiums down.
Agreed, this should be the priority -- really my point is that it has nothing to do with regulation or lack of, not that I would be unsupportive of requiring that all homes in high-risk areas be built up to a more strict code.
Can a nuclear plant operator get insurance against the costs of a nuclear meltdown?
The costs of the Fukushima meltdown are reportedly $200 billion. Offering a policy with a downside that big would basically be gambling the entire company.
An insurance company can't pay out more money than they have.
Imagine I'm the CEO of an insurance company with $50 billion in assets, and you're a customer wanting to insure against a risk with a 0.1% chance of happening.
If you want the insurance to cover a payout $10 million, the expected value is $10k so if you're willing to pay a premium of $11k I'm happy to do business with you.
If you want the insurance to cover a payout of $100 billion, the expected value is $10 million. But it doesn't matter if you're willing to pay a premium of $11 million, $20 million, $100 million. Because I don't have $100 billion, I can't tell you I'll pay out $100 billion.
Sure, reinsurance exists - but that relies on there being some other insurance company around that can eat a $100 billion loss. Not many fools who'd take a gamble with that much downside.
In your follow-up example, they could reinsure much of the $200B so that they're only liable for a small(er) part of the losses.
The calculation is thus whether they can pay the premiums on the excess (and accept reinsurers' contractual terms) and still make money.
There are impossibility proofs in many domains and I wouldn’t be surprised to discover that there are certain conditions that create circumstances that aren’t insurable.
Asking sincerely
I would argue that if the cost of the insurance exceeds the available money, that counts as de facto "uninsurable".
Tautologically false: when "you can't afford it" because there isn't enough money to pay for it, you cannot in fact buy it.