CAT bonds, reinsurance, state insurers of last resort

[prairiewindmomma]

Can we talk about this a bit? 
 

We’re hitting some tipping points with the number of climate related crises happening and soon to happen. 
 

I think at this point that most people are aware that home owner’s insurance companies have been pulling out of high risk areas—Florida (hurricanes) and California (wildfires) often make the news. Louisiana and Texas are probably next on the list (flooding) followed by Colorado (wildfires). Because homeowners are required by their mortgage companies to carry homeowner insurance, where private insurance companies will no longer bear the risk, states step in to act as insurers of last resort. States do not carry enough cash to step in should a major catastrophe hit. In Florida, the state legislature has decided to pass on costs to each resident (last I heard about $65k/person?) if a cat 5 hurricane hits. In California, no decisions have been made as to how to deal with underfunded claims.

I’ve been watching the CAT (catastrophe) bond market, following First Street Foundation (risk by street address assessments), and the 5th National climate assessment and we have very good data about what is coming for us in terms of upcoming national disasters….and it is abundantly clear that the cumulative weight of all of those disasters is not something standard insurance companies are not going to take on in high risk areas and that states and the feds arent going to be able to continue to bail areas out.

Likewise—USDA with indemnity claims for poultry culls, or crop insurance for crop failures in a world with increasingly unstable weather, and so on. 
 

Is this on anyone else’s radar? 
 

 

[Faith-manor]

It is on hours. The Alabama house insurer is pulling out. We are up in the mountains, an hour south of the TN line, and really do not suffer much from hurricane issues though that may change in the future. The insurer does not want to insure the gulf coast so is pulling out of the entire state. Supposedly our agent can get us in with another company, but it had also put us on a timeline to sell the home within 4 years. It was supposed to be our winter retirement Shangri LA. But climate change effects are now advancing so rapidly, that this probably cannot happen. People are still moving to Huntsville in record numbers due to employment so my guess is we will not have trouble selling if we don't hold on too long, and Alabama will have to state insure.

 

[prairiewindmomma]

Some states have statutes which really limit what insurance companies are allowed to do—it seems to be pushing some companies out of state altogether rather than allowing them to continue selling in lower risk areas.

[SHP]

I have been following for a while and find myself struggling with words. I don't live in an area that is currently impacted but I am keeping a very close watch and am more than open to relocation if needed. 

Building and choosing to live in fire zones is just something I cannot imagine, but that is likely due to childhood trauma from being in a house fire and getting physically ill seeing video coverage of the fires. My trauma aside, I feel we need to look at people and what drives them to stay vs moving to someplace with less risk so we can address those concerns and work towards change. I am sure studies have been done, if anyone knows any I would like to read the.

I don't think there is an easy solution. Eventually, people will have to move, they will not be able to afford to stay. I am still amazed more haven't moved already. 

 

[Faith-manor]

10 minutes ago, SHP said:

I have been following for a while and find myself struggling with words. I don't live in an area that is currently impacted but I am keeping a very close watch and am more than open to relocation if needed. 

Building and choosing to live in fire zones is just something I cannot imagine, but that is likely due to childhood trauma from being in a house fire and getting physically ill seeing video coverage of the fires. My trauma aside, I feel we need to look at people and what drives them to stay vs moving to someplace with less risk so we can address those concerns and work towards change. I am sure studies have been done, if anyone knows any I would like to read the.

I don't think there is an easy solution. Eventually, people will have to move, they will not be able to afford to stay. I am still amazed more haven't moved already. 

 

Moving with less risk is not an option really. We already have a housing crisis, if we have large numbers of people move from the coasts, and then also from wildfire areas, the safer places like Michigan, Wisconsin, Minnesota, Western New York State, Ohio, Illinois, Indiana, Western PA, Vermont...don't have the infrastructure, the housing, the medical professionals, the anything to really handle climate movers and refugees by the tens of thousands to upwards of millions. Our governments are about 40 years behind planning for this. Climate refugees will end up, even if they are US citizens, in National Guard camps under crude care unless they have relatives who can take them in. 

Short term a few at a time can move. But if say a million Floridians flew the coup due to lack of homeowner's insurance and climate risks, we are all in big trouble. There are some rather quick, in the grand scheme of things, options including government instigated and funded construction of duplexes and apartment complexes which are a more efficient method of housing large numbers than building single family residences. It would have to be tax subsidized. I can tell you that the folks from these states are not keen to pay for it. In addition, Michiganders are pretty concerned about having an influx of people who will not respect the Great Lakes and our gorgeous outdoor life. They see the endless National Park Tourons posts, and just pray none of them want to move here! It is a massive issue because our society has refused to spend time thinking about, discussing, and acting in the face of the inevitable.

It isn't as if we have a safe from everything region either. The ones I mentioned often face "snowmaggedon", icy roads that cause major pile ups, temperatures the folks on the coasts are not used to and could be deadly when not prepared for them, some tornados, and we do get wildfires, just not nearly as often or as large. We don't have " safe from mother nature" either. In general, probably statistically safer though.

[Ausmumof3]

Our previous insurer stopped insuring any properties over a certain size a couple of years back. I’m pretty sure that was a way of getting rid of higher fire risk properties without directly saying that’s what they’re doing. 
 

You can’t really have everyone choose not to live in high fire danger areas here or there would be no farming and so no food. The specific area where we are is more lifestyle but still has significant orchards, nurseries, vineyards, fig trees etc through it.

 

[SHP]

10 minutes ago, Faith-manor said:

Moving with less risk is not an option really. We already have a housing crisis, if we have large numbers of people move from the coasts, and then also from wildfire areas, the safer places like Michigan, Wisconsin, Minnesota, Western New York State, Ohio, Illinois, Indiana, Western PA, Vermont...don't have the infrastructure, the housing, the medical professionals, the anything to really handle climate movers and refugees by the tens of thousands to upwards of millions. Our governments are about 40 years behind planning for this. Climate refugees will end up, even if they are US citizens, in National Guard camps under crude care unless they have relatives who can take them in. 

Short term a few at a time can move. But if say a million Floridians flew the coup due to lack of homeowner's insurance and climate risks, we are all in big trouble. There are some rather quick, in the grand scheme of things, options including government instigated and funded construction of duplexes and apartment complexes which are a more efficient method of housing large numbers than building single family residences. It would have to be tax subsidized. I can tell you that the folks from these states are not keen to pay for it. In addition, Michiganders are pretty concerned about having an influx of people who will not respect the Great Lakes and our gorgeous outdoor life. They see the endless National Park Tourons posts, and just pray none of them want to move here! It is a massive issue because our society has refused to spend time thinking about, discussing, and acting in the face of the inevitable.

It isn't as if we have a safe from everything region either. The ones I mentioned often face "snowmaggedon", icy roads that cause major pile ups, temperatures the folks on the coasts are not used to and could be deadly when not prepared for them, some tornados, and we do get wildfires, just not nearly as often or as large. We don't have " safe from mother nature" either. In general, probably statistically safer though.

I didn't mean a mass exodus, no place can handle that. I meant in general. Yes there is a housing crisis everywhere, but if the choice is someplace with such a high risk that insurance companies are leaving and someplace with lower risk I, personally, would prefer the lower risk option. A house is a huge investment and I just cannot imagine taking that gamble. 

I might be desensitized to it, but I don't put snowmaggedon in the same category since usually it doesn't wipe out entire neighborhoods. Tornadoes can, but even that seems to be a lower risk. 

[Pawz4me]

46 minutes ago, SHP said:

 

I don't think there is an easy solution. Eventually, people will have to move, they will not be able to afford to stay. I am still amazed more haven't moved already. 

 

I'm not surprised at all that more people haven't moved. Some lack the funds to do so. Some have deep family ties to the area. Some don't believe in climate change and think the worsening conditions over the past few years are just a blip. Some probably think it's less risky to stay where they are than to uproot their lives to move to another area they might hate. Others have enough savings to fund retirement in the area they're in, but not enough to move to a higher cost of living area. There are lots of valid (IMO) reasons people stay where they are.

What I don't understand is why people continue to voluntarily move to high risk areas. The southeastern NC coast down through the Myrtle Beach, SC, area has seen record growth in the past few years. And that's an area that sees a lot of hurricanes and tropical storms and will be affected by rising sea levels. People continue to flock to Florida, Arizona and lots of other sunbelt areas. I guess there's a lot of "it won't happen to me (or in my lifetime)" thinking. I read an article a couple of months ago about the growth in the southeastern NC/northeastern SC coastal areas and one lady said something along the lines of "I just wanted a sunny place along the coast that I could afford. I never even thought about hurricanes." SMH 

[Faith-manor]

14 minutes ago, SHP said:

I didn't mean a mass exodus, no place can handle that. I meant in general. Yes there is a housing crisis everywhere, but if the choice is someplace with such a high risk that insurance companies are leaving and someplace with lower risk I, personally, would prefer the lower risk option. A house is a huge investment and I just cannot imagine taking that gamble. 

I might be desensitized to it, but I don't put snowmaggedon in the same category since usually it doesn't wipe out entire neighborhoods. Tornadoes can, but even that seems to be a lower risk. 

No, it doesn't wipe out neighborhoods. Usually the problem is frozen pipes and flooded floors. That said, it is entirely possible the Great Lakes Region will experience flooding and major erosion on the coastlines. Sigh. 40 years wasted that could have been spent problem solving and tackling things head on for all the humans, not just the mega rich. It is beyond frustrating now, and crossed into the Twilight Zone.

[Faith-manor]

11 minutes ago, Pawz4me said:

I'm not surprised at all that more people haven't moved. Some lack the funds to do so. Some have deep family ties to the area. Some don't believe in climate change and think the worsening conditions over the past few years are just a blip. Some probably think it's less risky to stay where they are than to uproot their lives to move to another area they might hate. Others have enough savings to fund retirement in the area they're in, but not enough to move to a higher cost of living area. There are lots of valid (IMO) reasons people stay where they are.

What I don't understand is why people continue to voluntarily move to high risk areas. The southeastern NC coast down through the Myrtle Beach, SC, area has seen record growth in the past few years. And that's an area that sees a lot of hurricanes and tropical storms and will be affected by rising sea levels. People continue to flock to Florida, Arizona and lots of other sunbelt areas. I guess there's a lot of "it won't happen to me (or in my lifetime)" thinking. I read an article a couple of months ago about the growth in the southeastern NC/northeastern SC coastal areas and one lady said something along the lines of "I just wanted a sunny place along the coast that I could afford. I never even thought about hurricanes." SMH 

Agreed. I know of someone who just moved to Miami to live at the beach! 🤔🤔🤔 I am struggling to wrap my head around that as Miami is trying to figure out how on earth to deal with their flooding.

[Bootsie]

1 hour ago, SHP said:

I have been following for a while and find myself struggling with words. I don't live in an area that is currently impacted but I am keeping a very close watch and am more than open to relocation if needed. 

Building and choosing to live in fire zones is just something I cannot imagine, but that is likely due to childhood trauma from being in a house fire and getting physically ill seeing video coverage of the fires. My trauma aside, I feel we need to look at people and what drives them to stay vs moving to someplace with less risk so we can address those concerns and work towards change. I am sure studies have been done, if anyone knows any I would like to read the.

I don't think there is an easy solution. Eventually, people will have to move, they will not be able to afford to stay. I am still amazed more haven't moved already. 

 

Where would you suggest people move?  

[Bambam]

We lived on the Texas Gulf Coast for years. The reason? Jobs, good ones, excellent benefits for a two engineer household. Much harder to find that in any other location for what we enjoyed doing and were good at. Yes, our house insurance was high (avoid Tier One counties if possible back then), but our cost of living was very low compared to potential income.  Our other viable option was Saudi, but there were some disadvantages at that time for me with that plan. 

So, many of us don't chose a place to live, we find a place where we can work, be compensated fairly, and do the work we enjoy.  I know others that stay in the same place because it is important to them to stay near family. Lots of valid reasons for living in potentially hazardous places. 

As we got older, had children, we ended up moving north for a variety of reasons - but the main one was employment. I mean, you gotta have funds to live. 

[prairiewindmomma]

1 hour ago, Ausmumof3 said:

Our previous insurer stopped insuring any properties over a certain size a couple of years back. I’m pretty sure that was a way of getting rid of higher fire risk properties without directly saying that’s what they’re doing. 
 

You can’t really have everyone choose not to live in high fire danger areas here or there would be no farming and so no food. The specific area where we are is more lifestyle but still has significant orchards, nurseries, vineyards, fig trees etc through it.

 

This is us too.

Where we live, there isn't much danger of our home being burned over. But, if the insurance companies leave the state, we are just as affected.

IMO, I think there should be stricter building codes around urban/wildspace interface AND there should be zoning codes where there are simply no-build areas.  Many of the smaller cities that have burned over here are small villages that are essentially forest wrapped.  Residents of those cities would have had much better chances of not being burned over if they had more defensible space around them, spark guards on their roof ventilation, fiber cement siding, etc. 

I think we should be working harder to preserve financial feasibility for the insurance industry.  We can't do much about the fact that we're going to have more destructive storms (a lot of non-coastal areas have 4" hail), but we can absolutely build out our infrastructure to handle more severe rains and zone housing so that people aren't in areas that we absolutely know are going to flood out or are likely to burn out. 

[prairiewindmomma]

One of the other things I think we really have to reconcile, as humanity, is that there isn't going to be a "good" place in the coming decades.  Even if you are in the Great Lakes region (often heralded as the safety zone), the amount of temperature change coming from you is still going to result in widespread species loss and change, you're still going to be in the smoke zone from all of the trees burning in Canada, you're still going to have more severe hail and high precipitation events, and you're going to have longer periods of drought.  In some ways, areas that are going to be deeply impacted by sea level rise actually have more tools for adaptability available to them than "safer" places because they can draw upon resources to move/adapt/preserve highly valuable ports or industries. So, yes, a lot of residential Miami is going to be ever more super wet soon---but the ports will all be elevated and connections to them preserved as it's one of the largest ports in the US. 

 

[Faith-manor]

2 minutes ago, prairiewindmomma said:

One of the other things I think we really have to reconcile, as humanity, is that there isn't going to be a "good" place in the coming decades.  Even if you are in the Great Lakes region (often heralded as the safety zone), the amount of temperature change coming from you is still going to result in widespread species loss and change, you're still going to be in the smoke zone from all of the trees burning in Canada, you're still going to have more severe hail and high precipitation events, and you're going to have longer periods of drought.  In some ways, areas that are going to be deeply impacted by sea level rise actually have more tools for adaptability available to them than "safer" places because they can draw upon resources to move/adapt/preserve highly valuable ports or industries. So, yes, a lot of residential Miami is going to be ever more super wet soon---but the ports will all be elevated and connections to them preserved as it's one of the largest ports in the US. 

 

Maybe. The sea level rise is going to be so high that the elevated areas are nor going to withstand it. If you look at 2050  maps as well as 2100  maps, most of Florida is uninhabitable. That is true of many places. Literally a dead zone for humans. It isn't that the Great Lakes Region is a haven from change. Not at all. It is going to have major problems. The difference is survivability. It is somewhere humans can survive. That cannot be said of southern California, the deep south, Texas, the American southwest, the dry plains states. The prognosis is actually that dim. Nowhere will be imimmune. But there are places where are species can make it. I wouldn't clal it thriving, just averting extinction really. We will by the turn of the century lose a billion people, minimum to this and that is a conservative estimate from what I am reading. Pandemics plus apocalyptic weather events could cause that to be much higher. The world gdp estimate is 30-500 trillion dollars of disaster (basically more than the entire world economy produces currently) so there won't be money for technology and advancements to mitigate the circumstances. It all depends on if we hit the 3 degree threshold or not. At this rate? We will exceed 3.

[SHP]

4 hours ago, Faith-manor said:

No, it doesn't wipe out neighborhoods. Usually the problem is frozen pipes and flooded floors. That said, it is entirely possible the Great Lakes Region will experience flooding and major erosion on the coastlines. Sigh. 40 years wasted that could have been spent problem solving and tackling things head on for all the humans, not just the mega rich. It is beyond frustrating now, and crossed into the Twilight Zone.

Ok, while we do get into double digit negative temps, they don’t hold very long so maybe this doesn't work there, but don't people use heat tape and similar things for their pipes to prevent that? Or am I just far too bored with standard home improvement projects, like painting, and am an anomaly?

 

I read about the Great Lakes coasts as an adult and was shocked. I agree about the last 40 years being wasted. 

[Faith-manor]

40 minutes ago, SHP said:

Ok, while we do get into double digit negative temps, they don’t hold very long so maybe this doesn't work there, but don't people use heat tape and similar things for their pipes to prevent that? Or am I just far too bored with standard home improvement projects, like painting, and am an anomaly?

 

I read about the Great Lakes coasts as an adult and was shocked. I agree about the last 40 years being wasted. 

Some mitigations work for short term loss of power/heat but not long term. I remember an ice storm in the 70's in which homeowners of well insulated homes still had to thaw pipes with blow torches. Unfortunately, many folks need help with improvements that would mitigate severe change. We havea lot of folks living in very run down homes and apartments in this state, some face dire peril every single winter. Apart from some feeble tax credits for energy upgrades like energy star windows or insulation or the massive investment in solar, there have not been any attempts to assist with upfront costs all of which could have also reduced emissions through reduction in heating and cooling consumption. As always the worst of what has happened and is to come will fall hardest on the folks with the least financial ability to mitigate anything or provide even the smallest comfort to their family.

Our next place, despite the expense, is getting geothermal and enough solar setup plus car battery bank to run it. That is a privilege. Most folks cannot afford this expense.