Recent devastating wildfires and other climate change-fueled disasters are casting a shadow over the future of insurance, prompting a closer examination of potential solutions. Dave Jones, the former California insurance commissioner, now serving as the director of UC Berkeley School of Law’s Climate Risk Initiative, has offered insights into addressing these challenges.
During his tenure as commissioner from 2011 to 2018, California witnessed some of its most destructive wildfires. In the face of these escalating climate-related risks, major insurers in California have recently halted the issuance of new homeowner policies.
Jones emphasizes that the increasing frequency and severity of weather-related events, attributed to climate change, are resulting in significant human casualties, injuries, property destruction, and substantial financial losses for insurers. He warns that certain regions in the United States are on a trajectory towards an “uninsurable future” due to the escalating risks and the magnitude of losses, making it financially untenable for insurers to provide coverage and maintain reasonable profits.
The key to averting this crisis, according to Jones, lies in addressing the root cause: reducing greenhouse gas emissions. A crucial step in mitigating the impact of climate change on insurance viability involves incorporating prescribed fires and other wildfire mitigation efforts into insurance models. Jones and his coauthors highlighted this potential in a 2021 report, suggesting that such measures could contribute to lowering insurance costs.
However, Jones expresses frustration over the reluctance of insurers to integrate these mitigation efforts voluntarily into their models. He advocates for a more proactive role for state governments, asserting that they may need to mandate the inclusion of these measures to ensure their implementation.
As the threat of an “uninsurable future” looms over many western regions due to climate change, Jones’ proposals underscore the urgency for collaborative efforts between the insurance industry, policymakers, and communities to navigate and mitigate the growing challenges associated with climate-related disasters.
