Climate change is fueling an insurance crisis. There’s no easy fix.

In California, State Farm and Allstate recently stopped selling new home insurance policies after years of catastrophic wildfires. In Louisiana, at least seven insurance companies have failed since Hurricane Ida. And in Florida, most big insurance companies have already pulled out of the storm-battered state.

In these disaster-prone states, the climate crisis is fueling an insurance crisis, leaving homeowners struggling to find affordable coverage. Yet policymakers have few easy fixes at their fingertips.

“None of the solutions here are easy,” said Benjamin Keys, a professor of real estate and finance at the University of Pennsylvania’s Wharton School who has studied the effects of climate-change-fueled disasters on insurance markets. […]

new federal report, released today by the Treasury Department’s Federal Insurance Office, reinforces this conclusion. While it offers 20 recommendations for state insurance regulators, it acknowledges that the Biden administration has limited authority to compel these changes, a Treasury official said on a call with reporters yesterday.

If you’re a homeowner in California, Florida or another disaster-prone state, you may be wondering: What can policymakers do to make it easier — and cheaper — for folks to get insurance?

Here are three possible solutions, along with related challenges:

1. Update California’s wildfire models

In 1988, California voters passed Proposition 103, which requires insurance companies to get approval from the state Department of Insurance before charging new rates.

Under Prop 103, when insurance companies try to justify higher rates, they aren’t allowed to cite the increased risk of wildfires due to climate change. Insurance industry officials say this policy makes no sense today, and they’re calling on the state to update it.

“In Florida, they’re modeling for hurricanes, and in the Tornado Alley states, they’re modeling for tornadoes. So in California, they obviously should be modeling for wildfires,” said Mark Friedlander, a spokesman for the Insurance Information Institute, an industry group.

But consumer advocates generally oppose letting insurance companies use wildfire models, fearing the companies will rely on them to rationalize extreme and unwarranted price hikes.

“This has nothing to do with climate change; it has to do with the industry’s greed and its 35-year campaign — so far unsuccessful — to escape the requirements of Prop 103,” Harvey Rosenfield, the founder of Consumer Watchdog, which spearheaded the campaign to pass Prop 103, told the Los Angeles Times.

California already has some of the highest housing costs in the country. And the price of building and rebuilding homes in fire-prone areas has skyrocketed in recent years, leading to “gentrification by fire,” as our colleague Scott Wilson recently reported.

About a week-and-a-half after State Farm announced it would stop offering new coverage in California, the state’s insurance department said it would hold a public workshop on the use of fire models before considering potential regulations. The workshop is scheduled for July 13.

2. Subsidize policies for low-income people

While private insurers have pulled back from risky areas, California and other states do offer FAIR plans, which are intended as public insurers of last resort.

Thirty-two states and the District of Columbia offer some sort of FAIR plan, according to the Treasury report. Despite its intended purpose as a last-ditch option, Louisiana’s FAIR plan saw a threefold increase in the number of policyholders from 2021 to 2022, causing it to seek and obtain a 63 percent rate increase, the report says.

FAIR plans are usually more expensive than standard home insurance policies. That has led some consumer advocates to suggest subsidizing these plans for low-income people in high-risk areas.

But the high price of the plans sends an important signal of the dangers of living in certain areas, said Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund and vice chair of the California Climate Insurance Working Group.

It illustrates “where areas are becoming uneconomic to continue to inhabit because the risks are getting so great,” Kousky said.

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3. Encourage ‘managed retreat’

That brings us to the third and final solution, and one that might face the thorniest obstacles: the concept of “managed retreat.”

At its core, the concept is about getting people to leave a place they call home. Oftentimes, the place has become too difficult or expensive to live in because of rising seas, stronger storms or other impacts of a warming world.

One form of managed retreat is voluntary buyout programs for properties that are repeatedly flooded. Another is restrictions on new development in risky regions, such as Arizona’s new limits on housing in the fast-growing Phoenix suburbs that lack an adequate groundwater supply.

But property developers are likely to lobby against such restrictions, while local businesses are sure to sound the alarm about the economic toll.

“If you say, ‘Hey, no more building in our town,’ is that a death sentence for that community long-term?” Keys asked. “I think that’s a very difficult challenge for these communities.”

Extreme events

Extreme rainfall is more common than federal data suggests

Extreme rainfall is becoming more common than the federal government’s estimates would suggest, as climate change fuels more intense precipitation across the country, according to data released yesterday by the nonprofit First Street Foundation, The Washington Post’s Kevin CroweJohn Muyskens and Brady Dennis report.

In a new peer-reviewed model, the group says the government’s precipitation frequency estimates, which are considered the authoritative source for planning and infrastructure design nationwide, don’t fully capture the frequency and severity of extreme precipitation in a changing climate.

What the government classifies as a “1-in-100 year storm” — an event with a 1 percent chance of happening any given year — could happen every 25 years in roughly 20 percent of the country. And in the case of about 20 counties that are home to more than 1.3 million people — including parts of Indiana, Kentucky, Pennsylvania and North Carolina— such extreme rain events could happen on average once a decade.

Because the government’s official precipitation estimates don’t yet account for climate change, “it is underpredicting what the actual risk is today,” said Matthew Eby, First Street’s founder and chief executive.

Pressure points

Cement emits as much CO2 as India. Why is it so hard to fix?

Cement, a key component of concrete, generates 8 percent of global carbon emissions — nearly triple the carbon footprint of the aviation industry, The Post’s Shannon Osaka reports.

The most common type of cement in the world is Portland cement, which is made of limestone that is baked in kilns at incredibly high temperatures. The process separates carbon dioxide from calcium oxide, or lime, a key ingredient in the cement that helps glue together roads, bridges and buildings. Not only does the carbon from the reaction leak into the atmosphere, but cement producers also rely on fossil fuels to heat the kiln.

To mitigate the industry’s carbon footprint, some producers are trying to make concrete with less cement, instead using waste from coal power plants or other facilities. Some start-ups are also experimenting with injecting and storing CO2 in concrete itself.

But progress is slow. Concrete is a crucial component in modern construction; changing its ingredients poses not only an engineering problem but also a regulatory and safety problem.

Agency alert

Biden administration announces $1.7 billion to buy electric and low-emission buses

The Transportation Department yesterday announced it is awarding nearly $1.7 billion in grants for transit projects in 46 states and territories to purchase zero- and low-emission buses, Josh Boak reports for the Associated Press.

The grants, which come from the 2021 bipartisan infrastructure law, are meant to help transit agencies and state and local governments buy 1,700 domestically built buses, with at least half being zero-emission.

The Washington, D.C., transit authority will get a $104 million grant to buy 100 electric buses and renovate a bus garage to support them, The Post’s Justin George reports.

“Every day, millions of Americans climb aboard over 60,000 buses to get to work, to school, doctor’s appointments, everywhere they need to be,” Transportation Secretary Pete Buttigieg said on a call with reporters. “These are unprecedented levels of investment when it comes to putting modern, cleaner buses on the road.”

Monday’s announcement marks the second round of grants from the infrastructure law. The Biden administration has so far invested $3.3 billion in efforts to electrify buses and related projects. The Transportation Department expects to deliver an additional $5 billion over the next three years.

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