The debate over crop insurance, as climate change drives the price up

A hearing began Thursday morning in the lawsuit 10 states filed against FEMA’s flood insurance rate increases.

U.S. District Court Judge Darrel J. Papillion heard testimony Thursday morning from three of the five witnesses presented by Solicitor General Liz Murrill, who represented 10 states, 43 parishes, 12 levee boards, and more. Murrill is seeking an injunction to pause the Federal Emergency Management Agency’s implementation of Risk Rating 2.0, the new way FEMA is assessing risks to price insurance.

The new flood insurance program, named Risk Rating 2.0, increases prices by 17.9% a year, limited by law. The average total increase to Lafourche will be 321%, and for Terrebonne, 305%. The hardest hit parish is Plaquemines, which will see a 545% increase.


The risk of devastating wildfires in California is getting worse, thanks to climate change, according to a new study published in the journal Nature. And that increased risk is putting pressure on insurers, making it more expensive, or even impossible, for some homeowners to find insurance coverage for their properties.

The researchers used machine learning to demonstrate that higher temperatures have been drying out fuels faster, increasing the risk of extreme wildfire growth by 25% over pre-industrial conditions.

Wildfires, heat and drought were responsible for more than $18 billion worth of economic damage last year, according to professional services firm Aon. Costs can vary widely from year to year, but overall, they have been rising.  For example, a decade ago, in 2013, such losses totaled $620 million, per reinsurance provider Munich Re.

Insurers Restrict California Policies Because of Wildfire Risk

At least two major insurers, Allstate and State Farm, have announced they will stop writing new homeowners’ policies in California, citing the increased risk of severe wildfires in the state and soaring construction costs.

According to news reports, several other insurers, including Farmers and USAA, are scaling back their coverage in California. And experts are predicting that other companies selling homeowners insurance in the state will likely follow in their footsteps if they can’t price their policies to account for the risk.

“From the insurers’ perspective, there’s just no reason to stay,” says Daniel Schwarcz, a professor at the University of Minnesota Law School who studies insurance. “The future’s not looking great for private insurance in states that have significant wildfire exposure.”

Regulatory hurdles are making it even harder for insurers to provide affordable coverage for California homeowners, industry observers note.

Insurers doing business in the state can’t use forward-looking catastrophic models or consider reinsurance costs when figuring rates. They’re also required to contribute to and support the FAIR plan, which provides coverage for California homeowners who cannot get private wildfire insurance.

In addition, insurance companies must get prior approval from the state before raising rates, under Proposition 103, which was passed by California voters in 1988. The system also allows members of the public to intervene, says Karen Collins, a vice president with the American Property Casualty Insurance Association.

Depending on the size of the rate request, those interventions “can even double or triple what is the average time frame to secure a rate approval,” Collins says, leaving an insurer unable to quickly respond to price trends. “That can create a situation of rate inadequacy,” she explains.

Can Wildfire Risk Be Reduced?
“Wildfires have led to too many very large losses over the past decade,” according to Tom Larsen, associate vice president for hazard and risk management for property data provider CoreLogic. But at a September 12 webinar on wildfire risk and insurance, Larsen said the challenge of reducing wildfire risk is “not unsolvable.”

He pointed to community education, more frequent risk assessment, better planning and mitigation steps as ways to reduce the impact of wildfires.

The Nature study, which was co-authored by Breakthrough Institute climate and energy group co-director Patrick T. Brown, a visiting professor at San Jose State University, focuses on how climate change affects wildfire fuels, potentially leading to more dangerous fire behavior. Steps like forest-thinning and prescribed burns can help clear out potential fuels and, advocates hope, reduce the frequency of extreme wildfires.

How Homeowners Can Find and Keep Coverage
If your insurance company has announced that it’s leaving your state, you still have time to shop for a new provider. If you’ve paid your premiums and haven’t committed fraud, your insurer must continue to cover you through the end of your policy term.

In California, a consumer protection law puts a one-year moratorium on policy cancellations or non-renewals in areas where the governor has declared a state of emergency due to wildfire.

The California Department of Insurance advises homeowners who receive a non-renewal notice to contact their insurance company and ask if there’s something they can do to lessen their risk and keep their insurance. It also suggests looking for a new insurer immediately. More tips can be found on its website, which also offers a tool for finding an agent or broker.

No matter where you live, experts suggest periodically comparing home insurance quotes to make sure you’re getting the best deal possible.

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