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It'd take their uninsured home getting destroyed when they don't have any money for a replacement. That's usually how market mechanisms work: you can no longer

It'd take their uninsured home getting destroyed when they don't have any money for a replacement. That's usually how market mechanisms work: you can no longer do something when you run out of money for it. (Also, I'm not convinced that the vast majority of houses in California and Florida are economically uninsurable. There's a wide variety in actual climate risk: houses in the middle of an urban area don't realistically have much more risk from wildfires than they do from an ordinary house fire, while houses in Central Florida are, as another commenter mentioned, much less vulnerable to hurricanes than houses on the coast. As I mentioned to another commenter, the rational response to everyone leaving an area, if it's not actually economically unviable, is to start your own insurance company and fill the void they left. There may be a business opportunity for startup insurers with better risk models than the insurers that are leaving the area.)

toomuchtodo 3y ago
When the house is destroyed, the government must then buy the parcel and lock it up so it’s never developed again. Otherwise, someone else will build and come with their hand out when the next catastrophic event occurs. https://www.fema.gov/press-release/20230502/fact-sheet-acquisition-property-after-flood-event https://www.fema.gov/press-release/20230502/fact-sheet-acqui... https://theconversation.com/when-homes-flood-who-retreats-and-to-where-we-mapped-thousands-of-fema-buyouts-and-found-distance-and-race-play-a-role-206590 https://theconversation.com/when-homes-flood-who-retreats-an...
- acdha 3y ago
  I’ve thought that ever since I was a kid reading news reports about the trailer park at the mouth of a local river getting junked every few years when Southern California got more rain than average. Let FEMA help people, sure, but it should be a one-time conversion to national forest not an “act of god” which happens multiple times per decade.
bombcar 3y ago
What happens is the insurers are only allowed to insure by large areas (perhaps the entire state) so they normally handle the uninsurable areas by charging insanely high for those places - but that is being prohibited. So they either need to be allowed to let prices float or declare areas smaller than a state as “unisurable”.
- nostrademons 3y ago
  Ah, I could see how this'd lead to market failure. Any info on the specific regulation that's causing this? It's having pretty severe negative impacts on the densely populated urban areas of California to prop up specific parts of the WUI that really should not have people living in them anyway.
  - bombcar 3y ago
    I don’t have the direct citations offhand, but I believe it’s a conflux of one law limiting price increases and an entirely separate law prevention something like “location discrimination” which companies like to do if they can to avoid servicing poor and other disprofitable areas.
mschuster91 3y ago
> There may be a business opportunity for startup insurers with better risk models than the insurers that are leaving the area. Insurance is one of the most regulated areas in business, and for good reasons - too many cases of shady or undercapitalized companies going belly-up and leaving the customers stranded, or being outright scams. Besides, even the largest insurance companies don't shoulder all the risk themselves - no company can survive getting hit by a few "century events" in too short order, so they purchase reinsurance, and even if your risk model may be "better", your reinsurance rates will still be based on the classic risk model. In any case I seriously doubt it that any startup could be a threat to the established giants of the insurance world with hundreds of years of experience in drawing up risk tables - Lloyd’s of London dates back to the 17th century [1] for a reason. [1] https://en.wikipedia.org/wiki/Lloyd%27s_of_London https://en.wikipedia.org/wiki/Lloyd%27s_of_London

toomuchtodo 3y ago

When the house is destroyed, the government must then buy the parcel and lock it up so it’s never developed again. Otherwise, someone else will build and come with their hand out when the next catastrophic event occurs. https://www.fema.gov/press-release/20230502/fact-sheet-acquisition-property-after-flood-event https://www.fema.gov/press-release/20230502/fact-sheet-acqui... https://theconversation.com/when-homes-flood-who-retreats-and-to-where-we-mapped-thousands-of-fema-buyouts-and-found-distance-and-race-play-a-role-206590 https://theconversation.com/when-homes-flood-who-retreats-an...

acdha 3y ago
I’ve thought that ever since I was a kid reading news reports about the trailer park at the mouth of a local river getting junked every few years when Southern California got more rain than average. Let FEMA help people, sure, but it should be a one-time conversion to national forest not an “act of god” which happens multiple times per decade.

bombcar 3y ago

What happens is the insurers are only allowed to insure by large areas (perhaps the entire state) so they normally handle the uninsurable areas by charging insanely high for those places - but that is being prohibited. So they either need to be allowed to let prices float or declare areas smaller than a state as “unisurable”.

nostrademons 3y ago
Ah, I could see how this'd lead to market failure. Any info on the specific regulation that's causing this? It's having pretty severe negative impacts on the densely populated urban areas of California to prop up specific parts of the WUI that really should not have people living in them anyway.
- bombcar 3y ago
  I don’t have the direct citations offhand, but I believe it’s a conflux of one law limiting price increases and an entirely separate law prevention something like “location discrimination” which companies like to do if they can to avoid servicing poor and other disprofitable areas.

mschuster91 3y ago

> There may be a business opportunity for startup insurers with better risk models than the insurers that are leaving the area. Insurance is one of the most regulated areas in business, and for good reasons - too many cases of shady or undercapitalized companies going belly-up and leaving the customers stranded, or being outright scams. Besides, even the largest insurance companies don't shoulder all the risk themselves - no company can survive getting hit by a few "century events" in too short order, so they purchase reinsurance, and even if your risk model may be "better", your reinsurance rates will still be based on the classic risk model. In any case I seriously doubt it that any startup could be a threat to the established giants of the insurance world with hundreds of years of experience in drawing up risk tables - Lloyd’s of London dates back to the 17th century [1] for a reason. [1] https://en.wikipedia.org/wiki/Lloyd%27s_of_London https://en.wikipedia.org/wiki/Lloyd%27s_of_London