In unity reality, everything is connected, so any evaluation of a situation has only a relative “beginning” point. In most cases, the “start” is when something rises to the point of unavoidable awareness. A case in point is the home owner’s insurance crisis.
An arbitrary beginning might be the end of the last Ice Age, about 12,000 years ago. Atmospheric CO2, functioning much like a home thermostat, rose 50 percent over a few thousand years, and then held steady. This warmed the planet enough to melt ice sheets several miles thick, allowing the rise of human civilizations. All of recorded history has occurred within a stable temperature range.
Beginning a few centuries ago, humans began tapped into stored fossil energy, which living organisms had laid down over millions of years. Beginning slowly, but increasing every year, the combustion waste products changed the atmospheric chemistry, slowly increasing the temperature. As of today, humans have increased the atmospheric CO2 content by another 50 percent.
When the planet heats, droughts increase, and fires increase in both frequency and intensity. The California fire season is now year around. A few years ago, a fire burning into Redding became a tornado, with temperature up to 2,000°F. Whole communities have been destroyed. As we continually add more CO2, this problem worsens.
The fire insurance industry evolved during more stable times. Historic records were reliable measure of future events, and insurance rates could be confidently established, giving a balance between homeowner affordability and insurance company profit motives. However, as the atmospheric chemistry changes, the rate of asset destruction increases. Historic records no longer accurately predict future losses. As the companies pay out more than their premiums bring in, they risk bankruptcy.
In California, regional insurance companies can’t raise rates arbitrarily, but are legally constrained in order to insure homeowner affordability, a socialist balance against the normal greed inherent in insurance. Until recently, future forecasting of risk wasn’t allowed.
A further pressure on regional companies comes from the fact that they insure themselves with international reinsurance companies, which necessarily take long-term, global reality into account. Decades ago, they began to notice the climate crisis was increasing losses they covered, and they began to raise reinsurance rates to the regional companies.
With climate driven destruction increasing, regional companies were caught between the legal inability to raise rates locally, and the constantly increasing re-insurance rates. Rather than going bankrupt, regional companies began to quit the California market. The California FAIR Plan is a state-run backup insurance plan, providing coverage that is more limited and more expensive. However, a significant portion of the funds come from all the insurance companies operating within the state. Consequently, if too many for-profit insurance companies leave the state, the FAIR Plan is also at risk.
California has bowed to reality, and recently changed the rules to allow forecasting of future risk when setting rates. This reduces the threat of lack of available insurance, which could have crashed the entire real estate industry and the banking system which funds it. Uninsurable property loses 80 percent of its market value, threatening the property tax income of every level of government. While allowing rates to increase might keep insurance available, it won’t necessarily be affordable. The bankruptcy threat shifts from companies to individuals, neither being socially beneficial.
We pay about .4 percent of our home value in annual insurance costs. Other states already pay from 3 to 13 times as much. Florida has experienced 5 major hurricanes in the last 7 years. Flooding and storm damage is increasing so fast that the entire state may become uninsurable. Most of the US has yet to factor in the growing climate risks when it comes to insurance rates. Increasing climate driven losses threaten to bankrupt all forms of insurance, which is beginning to get more attention.
But adjusting insurance rates does nothing to deal with the root problem of our worsening atmospheric chemistry. Effectively dealing with this has two parts: decarbonization and sequestration. We are still adding ever more CO2 every year. Decarbonization is the process of re-engineering our entire economy to reduce that emission rate to zero as soon as possible. Sequestration is the process of removing 1,000 billion tons of CO2, returning to 300ppm, a level we know can sustain humanity.
While canceled insurance gets attention, we have to do more to leave a habitable planet for our descendants.
Crispin B. Hollinshead lives in Ukiah. This and previous articles can be found at cbhollinshead.blogspot.com.
