Intensifying climate-related events, particularly wildfires, are causing major concerns for California's already fragile insurance market. Major insurers like State Farm and Allstate have been scaling back homeowners coverage, leaving many policyholders vulnerable. The increasing frequency and severity of disasters like the recent California wildfires and hurricanes in Florida and North Carolina are outpacing insurance companies' ability to manage risk and costs, potentially leading to widespread rate hikes or even the collapse of the system.
“I don't think there's anything that I've ever seen quite like it, and the insurance companies are going to have a big problem because you're talking about big, big dollars,"and there is already worry over California’s fragile insurance market.
“So the main thing driving our our current situation with insurance is the fact that we're starting to see more severe and more frequent climate events and weather disasters in a way that we just haven't in the past," said Dr. Jeremy Porter who heads climate implications research for the nonprofit First Street Foundation, a group assessing climate risks around the country.
They're going to seek to make up that money somewhere, whether that's an overhead cost, whether it's raising rates just in high-risk areas, or whether they spread that out a little bit over their entire pool of insurance policyholders. It can impact people," said Porter. Early damage estimates are at $10 billion or more, a number that would severely strain the already stretched system. The FAIR plan says they will be able to pay out claims. The potential problem looms if and when everyone else's rates go up as a result of covering the catastrophic damages.
CALIFORNIA WILDFIRES INSURANCE CRISIS CLIMATE CHANGE DISASTER RISK HOMEOWNERS INSURANCE
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