Sun. Jul 14th, 2024

Fire Insurance Just the Beginning – The Ukiah Daily Journal

By Vaseline May26,2024

In unity reality, everything is connected, so any evaluation of a situation has only a relative ‘starting point’. In most cases, the ‘starting point’ is the moment when something reaches the point of inevitable consciousness. An example of this is the homeowner’s insurance crisis.

An arbitrary beginning could be the end of the last ice age, about 12,000 years ago. Atmospheric CO2, which functioned like a home thermostat, rose 50 percent in a few thousand years and then remained stable. This warmed the planet enough to melt ice caps miles thick, allowing human civilizations to emerge. All recorded history has occurred within a stable temperature range.

A few centuries ago, humans began using stored fossil energy that living organisms had stored over millions of years. Starting slowly but increasing each year, the waste products of combustion changed the atmospheric chemistry, causing temperatures to slowly increase. As of today, humans have increased the level of CO2 in the atmosphere by another 50 percent.

As the planet warms, droughts increase and fires increase in both frequency and intensity. California’s fire season is now year-round. A few years ago, a fire in Redding turned into a tornado, with temperatures reaching 2,000°F. Entire communities have been destroyed. As we continually add more CO2, this problem will only get worse.

The fire insurance sector evolved in more stable times. Historical data was a reliable measure of future events, and insurance rates could be set with confidence, striking a balance between homeowners’ affordability and insurance companies’ profit motives. However, as atmospheric chemistry changes, the rate of asset destruction increases. Historical data no longer accurately predicts future losses. Because the companies pay out more than their premiums earn, they run the risk of going bankrupt.

In California, regional insurance companies cannot arbitrarily raise interest rates, but are legally bound by legal restrictions to ensure affordability for homeowners, a socialist balance versus the normal greed inherent in insurance. Until recently, predicting future risks was not allowed.

Further pressure on regional companies comes from the fact that they insure with international reinsurance companies, which necessarily take into account longer-term global realities. Decades ago, they started noticing that the climate crisis was increasing the losses they covered, and they started raising reinsurance rates for the regional companies.

As climate-induced destruction increases, regional companies are caught between the legal inability to raise rates locally and continually rising reinsurance rates. Instead of going bankrupt, regional companies began leaving the California market. The California FAIR Plan is a state-administered reserve insurance plan that provides more limited and expensive coverage. However, a significant portion of the funds come from all insurance companies operating within the state. If too many profitable insurance companies leave the state, the FAIR Plan is also at risk.

California has come to terms with reality and recently changed its rules to allow predicting future risks when setting interest rates. This reduces the threat of a lack of available insurance, which could have crashed the entire real estate industry and the banking system that finances it. Uninsurable properties lose 80 percent of their market value, jeopardizing the property tax revenue of every level of government. While allowing rate increases can keep insurance available, it won’t necessarily make it affordable. The threat of bankruptcy shifts from companies to individuals, neither of which is socially beneficial.

Every year we pay approximately 0.4 percent of our home value in insurance costs. Other states already pay three to thirteen times as much. Florida has experienced five major hurricanes in the past seven years. Floods and storm damage are increasing so quickly that the entire state could become uninsurable. Most of the US has yet to consider growing climate risks when it comes to insurance rates. Rising climate-related losses threaten to bankrupt all forms of insurance, which is starting to gain more attention.

But adjusting insurance rates does nothing to address the core problem of our deteriorating atmospheric chemistry. Tackling this effectively consists of two parts: decarbonizing and capturing CO2 emissions. We are still adding more and more CO2 every year. Decarbonization is the process of redesigning our entire economy to reduce emissions to zero as quickly as possible. Sequestration is the process of removing 1 trillion tons of CO2 and returning it to 300 ppm, a level we know can sustain humanity.

While canceled insurance policies are getting attention, we must do more to leave a habitable planet for our descendants.

Crispin B. Hollinshead lives in Ukiah. This and previous articles can be found at

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