Issuing
Other solutions being discussed or debated include measures to mitigate wildfire risks, or the politically difficult proposition of moving residents out of harm's way, and not allow anyone to inhabit risky areas. These ideas also apply to hurricane and flood-prone regions.
Support for either option looks weak, according to Katherine Hempstead, a senior policy advisor at the Robert Wood Johnson Foundation and author of "Uncovered: The Story of Insurance in America."
"In coastal states, around mitigation for hurricanes, there's a little bit of public funding, but maybe not enough," she said. "It might be worth it to just say, we're going to invest in this so that everybody can mitigate."
Mitigation against fire and flood can be expensive, Hempstead added. Some states do offer incentives for homeowners to invest in mitigation measures, but that isn't available to all homeowners, she said. And the reduction of losses that mitigation would accomplish still might not be enough to keep insurance markets healthy.
"The question is can we get out of what's happening now through just loss reduction. I don't think anybody knows. Anybody who says they know can't really know," Hempstead said.
While getting a complete picture of climate risks is important, insurers and regulators could also consider price signaling, in which insurance premium prices act as a risk indicator, stated Jordan Haedtler, climate finance strategist with Climate Cabinet, an education, advocacy and lobbying group.
"Price signaling is more valuable in terms of determining where resources should flow, not in just enabling insurance companies to charge whatever they want," he said.
Residents of areas that now have high climate risks may have lived there for many years, and insurance costs rose sharply as these risks became evident. California residents in these circumstances testified about it in a
"If you live in a place that, through no fault of your own, has become uninsurable because it's so risky, it's not really fair to you," Hempstead said. "But it's not a great outcome to have you pay forever, and keep rebuilding your place and keep having these risks happen."
Having many homeowners in this situation, especially in California, could end up requiring government support, as Hempstead explained.
"It would be better to try to reconfigure the relationship between risk and premium, so that we don't always have this problem. Maybe that means we have to think about what kinds of structures we build and where we build them," she said. "I don't think it's crazy to think about a state finance role in a big affordability crisis, in home insurance, in a state where many probably feel they've lived there for a really long time, and all of a sudden it's completely unsafe to live there. And they can't sell their houses for that same reason. Is it just tough luck, or is there some sense that we're going to share the burden of that, at least at the state level, if not at the national level."
