Why insurers worry the world could soon become uninsurable | Hacker News Reader

Why insurers worry the world could soon become uninsurable

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49 pointsmooreds89 comments

First, insurance companies should be the last thing we consider when setting policy, this is propaganda for them trying to protect their racket, not anything more telling.

Second, governments and private companies should be looking at (socializing) mitigations that will keep risk within tolerable levels (without caring whether some legacy insurer continues to be able to gouge cusotmers). If there's a clear and identifiable threat, we can build dikes or sea walls or spillways or whatever it is that can alleviate the issue. "Think of the insurance implications" is a silly distraction.

> Second, governments and private companies should be looking at (socializing) mitigations that will keep risk within tolerable levels

The moral hazard is killer here. I fear that in practice what this means is that the rest of the US will end up bailing out the gormless Floridians who refuse to stop building McMansions on the coast. Insert the gif of Bugs Bunny cutting off Florida and letting it drift off into the Caribbean.

And the western US with their fires? Or the southern east coast that also gets hit with hurricanes? How about the increased flooding in the midwest? New construction size has increased across the US too. It's not a single zone.

Red states and the Federal Government don’t believe in climate change. Let them cover their own climate costs. California alone sends $86B to the Federal government. The moral hazard is covering the cost of bad faith actors acting in bad faith. Bootstraps and all that.

CA can't even get their own house in order. If they were serious, they would apply the wildlands fire code to all the new construction in LA after the recent fires, but they won't. The real moral hazard is thinking the risks, costs, and benefits are as clear cut as you're making them... plus the non-starter about implying not paying taxes.

They’re the world’s fourth largest economy (behind the US, China, and Germany), they’ll be fine economically. Red states actively choose to ignore climate change, with Texas going so far as to attempting to disadvantage renewables while supporting fossil fuels [1]. Florida’s insurance market is functionality insolvent [2]; they extend and pretend. Why would we financially help folks who don't believe in the active climate crisis? Vote for folks who dismantle FEMA? Vote for folks who rollback the inflation reduction act and climate mitigation spending [3]? Vote for folks who rollback vehicle emissions standards? Enjoy your vote. Better luck next time.

[1] https://prospect.org/environment/2025-06-05-texas-legislatur...

[2] https://www.bloomberg.com/news/features/2024-04-24/home-insu... | https://archive.today/g8Ic5

[3] https://www.lw.com/en/insights/one-big-beautiful-bill-new-la...

I'm not sure what you're even going off on at this point. You completely ignored my comment about how CA is handling things like fire code and fire insurance. It seems like youre just trying to start a political flame war.

I'm unsure how this isn't political. Some states are economic engines of the US, some states are net takers of resources. States that have resources by way of being economic engines should protect themselves from the coming impact of climate change (if one doesn't believe in climate change, or the impending risk it presents, don't bother replying, there is no common ground to be had). That's it, that's the thesis. How California is handling fire code and mitigation currently is somewhat immaterial; more importantly, they have the resources by way of their economy to fix the problem if and when they choose to (to spend to de-risk against fire risk). They have the economy of a developed nation state. They can spend whatever is required when they decide to appropriately spend. If you don't have the resources to defend against climate risk, or don't believe in the risk, you have little recourse against it.

This could've been a collective action problem at the nation state level; it no longer is due to political choices by people who believe a global climate phenomenon is a hoax. So those who can afford it must go it alone for the foreseeable future.

So according to you CA has the resources to rebuild themselves and should protect themselves, but you consider it immaterial that they are choosing not to protect themselves with fire code and insurance changes? This sounds classist - we can do whatever we want because we have money, but we don't want to pay taxes because that might help other states that are also making suboptimal choices. But both Florida and Texas (your examples) are also donor states. It's hard to find what the basis is for your thesis when it seems to be applied irrespective of the facts.

Yes, I am saying if you have the economic resources as a state, you should not help other states economically that do not believe in climate change (within the context of climate mitigation spending and transfers). Why would you help people working against you or who don't believe in what you're defending against?

Money is fungible, taxes don't work that way, both of your examples of FL and TX produce more fed tax revenue than they receive, so it's hard to see how you think this would apply.

States can increase their income taxes, which can be deducted against federal income taxes. This keeps the tax revenue internal to the state and avoids sending it to a federal government who would spend the tax revenue suboptimally. These funds can be spent on climate mitigation programs within a state. If your state has no income tax and relies on the federal government, that’s unfortunate (I suppose increasing property and sales tax is an option, if not regressive).

SALT limits have been bumped to $40k from $10k: https://www.nerdwallet.com/article/taxes/salt-tax-deduction

Lots of ways to make this work with policy.

Love this line of thought. Tired of dealing with bible thumpers who can't understand the basic physics of carbon in the atmosphere. All productive states (aka BLUE states) should keep their money and tell the feds to FAFO at this point. We need to protect ourselves, if they want to have their idiotic belief systems that's too bad. "Don't appeal to mercy to God the Father up in the sky, little man, because he's not at home and never was at home, and couldn't care less. What you do with yourself, whether you are happy or unhappy - live or die - is strictly your business and the universe doesn't care."

Not really. They're still going to get the money, but the deficit will be bigger.

Let's think about this. You say that Texas and Florida are "donors" in the same way as California is. But what do those states do? Take Texas. Its main industry by far is oil and gas -- an extractive and polluting industry, and one that causes pollution far and wide wherever the products are used. Any money that Texas has is paid for by current and future suffering, by causing the very climate change they say doesn't happen.

Florida is a tourist state. Everyone loves Disney and the beach, but any money from tourism is just brought in from somewhere else. Florida's tourism industry is also extractive, and tourist travel also causes untold climate damage.

But California? We have agriculture. We have software. We have logistics -- everything in your house probably came through Long Beach and on our highways. We even have our own Disney so we don't have to fly to yours. California's industries aren't extractive. They're productive. And we're careful to minimize or eliminate the externalities of our industries while we work to create the things you use every day. In many ways, California is America. Without us, the country would shrink and shrivel day by day until you've extracted all the good and left everyone else nothing.

"We have logistics -- everything in your house probably came through Long Beach and on our highways."

So high carbon as well. Texas, and Flordia especially also have ag. CA has a lot of tourism too. Claiming that CA is the only source of "good" is a bit over the top.

So, you believe that people with higher incomes and greater social standing should be permitted to make suboptimal choices with regard to climate sustainability? Is it really just a class thing more than the scientific implications of changing climate?

> And the western US with their fires? Or the southern east coast that also gets hit with hurricanes? How about the increased flooding in the midwest?

* Don't build in the WUI. Enforce/enact building codes that take into account NFPA's Firewise USA.

* Don't build on the coast. Enforce/enact building codes that take into account IBHS FORTIFIED techniques.

* Don't allow building / residency permits in floodplains.

The problem is mostly the existing homes. Things like flood zones have been increased in size. People rebuild on previous home sites, but code doesn't require those hardened techniques. You could build a house in a fire zone if you use the right materials and landscaping.

Insurance, homes, etc. are flows for the purposes of this analysis and so they aren't really that big a problem. Change the codes, so the stupid can't be recreated and it will handle itself as the old stuff is destroyed and not rebuilt/rebuilt in a way that can handle the reality of the situation with minimal insurance claim. Even if the rate of disaster doubles it's still an insurable problem in this setup and within 20-30 years the problem handles itself through natural aging out plus insurable destruction of the old stuff.

The key is to make it very easy to rebuild whatever you want within the constraint of new codes that ensure your building can handle its environment. If we let a california happen and hold everything up in development hell so almost nothing is being rebuilt six months to a year after the destruction is the real economy killer that is relevant here.

I agree that we also shouldn't be subsidizing the insurance of California houses built in the exceptionally flammable urban wild-land interface

California supplies a significant percentage of the federal budget -- more than your state in all probability. And our insurance industry is the fourth biggest in the world. We can afford to build anywhere we want, and any FEMA funding we get is just our own taxes repaid to us. Get good or get over it.

This is a short sighted view. Fire insurance in CA is high cost, if you can even get it. Many people would not in fact be able to afford building anywhere. The subsidy argument doesn't have to be at the federal level be even within the state from low risk to high risk areas.

> California supplies a significant percentage of the federal budget -- more than your state in all probability

Exactly as much as my state, as it so happens.

Seconded.

You have to be careful when applying moral hazard, because it's just authoritarian behavior with a more polite coating. There are times when it's appropriate and necessary to tell people what they can and can't do but I think this is a case where you either have to write and pass a law forbidding people to build and explicitly define the areas, even if it only forbids new construction, or continue bailing them out like any other natural disaster. This doesn't feel like a situation to "let the market figure it out" or abruptly pull disaster relief after the damage is done.

No, what's authoritarian is an unavoidable insurance scheme that ignores the concept of moral hazard. In fact, I am all for insurance, it's extremely efficient at large and an institution as old as humanity itself, but if you don't deal with moral hazard then the wheels come off the engine. If I'm in an insurance pool with a smoker and they break their leg, that's fine. If I'm in an insurance pool with a smoker and they get lung cancer, they better be paying more than me. Some things are decisions, not fate, and people need to be willing to bear the cost of their decisions. To the point, if that Floridian's house burns down or that Californian's house floods then that's fine; vice versa is the problem.

Easy. Don't apply the policy to new homes.

That' funny. In some cases the new homes have newer construction methods that make them more resilient, such as hurricane straps or better fire resistance.

People in red states can't afford those materials. Half of the houses in the Midwest still use PVC siding and wooden stilts in crawlspace. The first hot day or heavy rain they see and they start melting and molding. But that's all you can do on $30,000 a year from your Walmart job when every other employer in town leaves for the coasts.

If these were really common issues, the code wouldn't allow them. The melting siding is generally caused window reflections from other houses, especially with high efficiency windows. This happens all over the country.

This presumes that everyone who builds in coastal areas is "gormless" and deserves hardship. Millions of people live on islands and they don't get a choice where they build. Several Polynesian countries will disappear by the end of the decade. Are they "gormless"?

When you’ve rebuilt in the Dane location for a third or fourth time, on the same lot, why should we keep subsidizing the process? At what point do we say “you cannot build here any more”?

At the very least houses should be required to be MUCH stronger, able to withstand 185 mph winds, which seems to be the highest ever for a Florida hurricane.

Even if that location is a fire-prone hillside in Los Angeles? Is the gormlessness of a housing choice correlated with the income of the homeowner?

Well, insurance companies should be the most knowledgable about potential risks. Personally, I don't think it makes sense to spend lots of money to continue building in unsustainable locations (e.g. regular flooding) and we shouldn't be socialising those risks. Building mitigations can make sense in some circumstances, and that should reduce insurance premiums after they've been shown to be effective.

States like Florida in the U.S already have "state backed" insurers of last resort.

Home insurance is definitely skyrocketing, I live in Minnesota and my premium tripled in 2024.

https://en.m.wikipedia.org/wiki/Citizens_Property_Insurance_...

"governments and private companies should be looking at (socializing) mitigations that will keep risk within tolerable levels"

The problem is preference. There are more survivable structures and construction methods, but many people don't want to do them because they don't look as good. This isn't just a sea leave thing that might be better handled at the government level. We can look at stuff like the recent LA fires. If the stare was serious about fire prevention, they would apply the wildlands fire code to new construction in the city. Some people can't even be bothered about stuff like keeping dry brush away from their houses. As the country continues to build bigger and more expensive houses, we will continue to see prices rise.

> First, insurance companies should be the last thing we consider when setting policy, this is propaganda for them trying to protect their racket, not anything more telling.

Exactly what makes insurance a "racket"?

The first point isn't really true. We should definitely consider insurance company input when setting policy, we just have to be careful we consider if it's self serving BS, politically motivated nonsense, or intelligent concern with policy changes that could benefit humanity by mitigating the problem. As long as your putting 80% of what they say into bucket 1 or 2 you're probably fine.

You’re just shooting the messenger. The insurance companies don’t really make huge profit margins. There are also many mutual insurance companies that are non-profit. If they’re raising rates dramatically it’s because the risk is higher.

Now, at a societal and governmental level, that is absolutely telling you that you should be looking at what mitigations are possible.

At least in the US, insurers have been losing money in recent years. Definitely not price gouging. Insurance is an amazing service.

> Insurance is an amazing service

I've noticed it's done wonders for your healthcare system

Health insurance in the US, and other countries, is pretty far from traditional insurance markets where you pay a small amount of money to cover rare, catastrophic events (like your house burning down, or an earthquake).

The name might be similar, but the products actually function very differently. Health insurance in many countries covers routine, predictable "losses" like primary care for strep throat as well as long-term "losses" like prescription medication.

A lot of this is because a traditional insurance model isn't palatable when it comes to healthcare. You can't really employ price or service discrimination against high-risk people with preexisting conditions, like you can with auto insuring a Ferrari, or home insuring a coastal house in a hurricane zone.

Not to mention life insurance! You can't just look assume things work the same way because they have similar names.

I agree with your disgust with our healthcare, but I downvoted you because your comment is more of a gotcha than fostering conversation.

Many people don’t understand that insurance companies only make an 8-12% margin. Since each state requires all insurance companies to gain pricing approval to sell in their state (Filings), if healthcare costs go up within a given year the insurance company loses money. We don’t have an insurance issue, we have a healthcare and inflation cost issue. Same goes with home insurance.

What many don’t know: if you don’t like your insurance cost, it’s because of state legislation and cost in YOUR state - not federal govt.

"We don’t have an insurance issue, we have a healthcare and inflation cost issue. Same goes with home insurance."

I think this is the primary driver. However, we can't ignore how insurance company behavior also influences the pricing. The feds play a bigger role in this than you might think with things like Medicare/Medicaid reimbursement rates and residency funding leading to provider scarcity.

Not a big fan of "uninsurable". They'll happily insure high risk stuff, for an appropriate premium. It just becomes unaffordable to the average family.

As a side note there is another insurance disaster in the making - shadow fleet carrying millions of barrels of oil in old ships with opaque ownership and even murkier maintenance history...they don't do the whole insurance thing. Only a matter of time before the world faces a very awkward "who's picking up the bill" discussion. Small one already happened in the Black sea.

> They'll happily insure high risk stuff, for an appropriate premium.

From what I've seen, this isn't always the case. My parents' insurer stopped offering fire coverage in their area with no option to buy at a higher price.

FWIW and depending on where you are this could be down to local regulations. A lot of (most?) polities do not allow insurance companies to simply set prices based on their assessment of risks and the market, but rather place extremely heavy restrictions on the process (which further inevitably get politicized). They may also have regulations around minimum numbers of people to offer coverage to in an area and endless other related issues. So an insurance company that does the math and thinks it has to raise premiums 200% or whatever to make it work, unless somebody meets specific XYZ criteria around fire resistance (which are expensive), it may find that it simply is not allowed to at all, or not without long delays and a burdensome legal/PR battles. They always have the right to leave though.

This is likely because the state they live in does not allow insurance companies to price their coverage according to risk, and applies political pressure when they try to do so. Insurance companies are demonized and characterized as heartless, rapacious and greedy, despite the fact that they’re probably losing money at current prices. So, many companies decide to exit the market rather than be forced to sell a service that they expect to lose money on.

My parents were with State Farm for decades. SF withdrew from the commercial market since last year, forcing owners to find new policies, naturally for quite a lot more. And it seems like they aren't writing new policies for private residences in California at all now.

Several major insurers have stopped writing policies in California due to the fire risk.

https://www.foxbusiness.com/lifestyle/california-insurance-c...

Presumably they could try and find a different insurance firm or a boutique.

Not quite. In our part of the world insurers are stopping insuring against storm damage. Due to high incidence. Stopped period, not making it prohibitively expensive.

Are there regulations limiting what they can charge? I think that’s what is happening in CA with fire insurance.

If you can ensure satellites stuck on top of a rocket they can do storm damage too.

They just calculate the premium realise nobody is going to go for it and don’t offer it. Not because they can’t but because there is no point

Same outcome but the reason isn’t “uninsurable”.

If there are state regulations on rates it's possible that they can't set the rate to cover the risk while also being in compliance. If they have annualized profit caps and they need to cover those once every 10 year mega disasters, then they might not be able to comply and charge enough to cover it.

Stopped period because they’re not allowed to charge what it costs to cover that risk.

Well it makes no sense for a company to try to insure properties that are fully expected to be damaged regularly (e.g. due to seasonal flooding, fires etc). That would make the premiums equivalent to the rebuilding costs if the company is to operate long term and customers won't pay for those kinds of premiums. It's not a viable business and so why would an insurance company spend effort to try to offer that product?

Insurance is not gambling. It's the pooling of risk. Mistaking the two is a common error and leads people being confused about the word 'uninsurable'.

It's like a casino or bookie. They allow others to gamble while trying to have a house edge.

Sort of. Not all risks can be known. Occasionally there are occurrences that break the models.

yea, that's what I tell myself when I am investing as well.

"bro I am not yolo'ing 10K into 1DTEs, I am pOoLiNg mY rIsK and DivErsIfYing"

Chunks of NZ are becoming very expensive to uninsurable, and extreme impact weather events are getting more frequent.

It would be fair say a good portion of the population don't understand the maths of a weather event just how astronomically expensive a sudden flood is.

In our small town in the last 5 years, we've had 2-3 different "1 in 100 year" floods within 30km of each other (highly localised dramatic flooding and slips). To the point "1 in 100 year" is now a standing joke.

When did the council last revise your flood models? Up here in Queensland, it caused a real stir when the council released updated flood models and lots of "1/1000" year flood houses turned into "1/10"

I don't know. Certainly the frequency and severity is just eye opening. We had 2 1 in 50's with 1 in 100 in 3 weeks (!!!).

I know you guys have also had it bad over there.

I expect the insurance companies will start removing flood cover soon. Which then becomes a bit of a shit show with mortgages. Or will raise the premiums so high that they're effectively uninsurable.

Brisbane had cyclone Alfred that caused a major panic with ~100km-ish winds.

A friend went to visit NZ and 100km/hr winds was just another day...

Because they’re the ones who are supposed to pay money when shit blows up, and they are finally at the point where the giant flaming signs that it’s going to all blow up are within foreseeable shareholder ownership periods.

Insurance is supposed to average out small probability high impact events across a large number of smaller payments from more people. It is entirely expected to loose money on insurance as a single customer - that's usually great. It means your house hasn't burned down, you're in good healt and you bike hasn't been stolen. If we're now moving towards a world where due to man-made climate change certain classes of risks are no longer insurable, everyone looses.

I would think insurance would be among the least of worries?

I think they are using Insurance as a predictive indicator of how terrible things are. So you are largely agreeing.

IE:

1. insurance spreads a hurt across a society, using money as an instrument.

2. If insurance doesn't work anymore then the hurt is too large for society!

This linking of 1 and 2 may not be entirely true due to insurance not necessarily being a perfectly efficient "spreader" across society. But I think in practical terms it is close enough.

The linking doesn’t need to be perfect to have real-world consequences: as the article explains, dues to increasing heavy weather events, home owner insurance is harder or even impossible to obtain. Without HOI, you won’t get a mortgage, because that would mean the bank partially enters into that risk. No mortgage means a lot of people cannnot afford to own a house or flat.

> I would think insurance would be among the least of worries?

Canary in the coal mine:

* https://en.wikipedia.org/wiki/Sentinel_species

“If”?

This doesn’t seem surprising and I hope it isn’t. David Suzuki and others have gone on record saying that we’ve lost the climate fight. Politics and economics are useless at preventing it. Oil and gas won. We’re locked in for a post 1.5 C world.

You can’t insure against catastrophes that are basically guaranteed to happen.

It’s too late to restructure to prevent catastrophic climate change. Seems like all we can do is restructure to survive and take care of one another for as long as we can.

Who will have the most care taken of them?

Maybe the people with the most money? I have hopes society will have done something to reduce wealth inequality by then - but right now they are distant hopes.

Risk feels like a pendulum that periodically needs to swing back to the individual property owners. We're probably entering a cycle where homes need to be built in less risky locations and built more durable to risk.

I'm confused that this article made no mention of laws preventing insurance companies from accurately pricing insurance.

Otherwise they can increase the price to match the risk. Even if the risk is unpredictable they could increase the price until they were comfortable with the risk, or themselves get insurances to cover the risk of providing insurance.

I recall the insurance industries lost so much in the 2008 financial crisis that it wiped out all their profitability over all of human history to that point. I imagine they haven't made enough in the last two decades to outweigh those losses, so they probably are a net-negative as an industry, which is very funny.

I think it also has to do with asset inflation. Housing prices constantly rising makes insuring them more expensive.

That shouldn't be a major factor as it's the repair/rebuild costs that insurance companies are interested in. If house prices increase, it doesn't mean that it would cost more to rebuild them.

From what I have seen, the cost of home building has gone up a lot.

This seems based on outdated science to me. The world isn't just "getting hotter", the overall climate is changing due solely to human influence. The article makes it sound like insurers believe houses will start spontaneously combusting. What they should really worry about is desertification in populated areas and flooding along the coasts, and the inevitable humanitarian crisis and necessary social restructuring that those will require. We can't leave this to insurers - we need strong cooperation between governments and academia to plot a better course into our brave new world.

“the overall climate is changing due solely to human influence.”

Way past anything scientific. Spend 2 minutes googling “anthrophemoric co2 percentage”

Well solely is dramatizing but to a large extend it is true that the clima is changing because of human actions.

Certainly the rise in Co2 from 280 ppm to 420 ppm since the onset of industrialization is rather very likely due to human actions.

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