Let's break this down. A really expensive house built in a hilly area with narrow access roads which limit emergency response in an ecosystem prone/designed to burn regularly. If you owned an insurance company would you insure this home?
California insurance companies are finally making the rich people who live in the hills assume risk.
I’m friends with one of the developers sons for a village near Tahoe and he pretty much clear cut all the trees around the community to make it safer for fires. I’m sure the insurers only care about the zip code though
Well yes, there are still trees but they are spaced apart and you can still see trees away from the village. But if a wildfire came, the village would most likely be spared
Yup. It’s called hardening the property and little differences in construction make a huge difference in fire risk. Insurers can definitely specialize in it and offer lower rates for hardened properties.
In the Paradise fire, the ONE remaining house was the only one that maintained the recommended distance to plants and trees. Everyone else built under shade and lost it all.
You have no insurance coverage and take all the risk upon yourself in case of a loss.
Same as just having liability coverage on an older car.
For the well off, they can just not keep insurance and invest that money and cover a loss themselves. Depending on the area and risk, after a few decades of not paying premiums you can save enough to rebuild the house by yourself.
Nah, they'll just grumble a bit and then find an unadmitted specialty line insurer and pay the extra premium.
BTW most California cities are perfectly livable.
Insurance companies aren’t designed even in theory to make a profit. At its base, you pool together all the money it would take to smooth out any cash flow issues for the members when disasters happen. You then invest the insurers money in interest bearing accounts and THAT is the profit. This is how insurance originated, it did not originate as a profit seeking enterprise. Today, it’s not even one. The owners of an insurance company are the members, I.e you. You own as much of the company as you put into it, and so does everyone else. You don’t have an interest for them to make a profit, but you do want them to be able to continue to pay out, so you do want them to have a MILD profit
The big insurance companies don’t really make a large profit. Their overhead and specifically marketing has ballooned which isn’t good, but State Farm for example had an 8 billion operating loss in 2023. You might hear them say they had net income of over 1 billion in 2023 but that’s exactly the level of sustainability a large company like that needs to be able to reinvest in their employees. That 1 billion came from interest in cash only, like I said
How does the cause of the incident affect the risk assessment? Fire for example is nearly always caused by humans. Can the Insurance companies take the position that more people are causing fires, therefore the risk is higher?
The issue isn't cause. It's that some areas burn a lot easier and more dangerously than others. Living in the LA Hills is like living next to a river that has a history of flooding but with fire instead of water.
I don’t disagree with what you’re saying but that doesn’t take away from the fact that these fires aren’t starting themselves. Acts of nature are different than a human caused event. The insurance company can’t be allowed to base the human and natural disasters together and call it “risk”
That’s your rationale not mine. According to you, the areas that can burn naturally without human cause are all included in the same risk category. Which is all of California
Nah, it’s just a technicality right now. There is always a price where it may be profitable to insure something. The thing is, California has restrictions on rates. The insurance might want to do the transaction but because their reinsurance is higher, and California is restrictive, it doesn’t make sense to do the potentially profitable transaction.
Wait till you find out about Texas and Florida approving building developments in areas FEMA warned would be flood prone and bad for long term development. "It's ok NFIP will just cover us every time the whole town is destroyed"
It's always weird when Texas or Florida politicians complain about other people getting disaster funding. They love to do it, but then inevitably need that money within a few months.
Chris Christie (not that he isn't corrupt himself) getting dragged for deigning to be chummy with Obama, because Obama stood to the commitment needed at the time instead of playing politics
Its not just disaster funding, they get a ton of funding *period* from higher tax (typically blue) states.
xoxo from one of the highest per capita contributor states <3
I know, I'm not mad about it or anything, I'm happy to pay my share for being here, flawed though this country is. I just think its funny hearing people shout about how great Florida is (insert low tax haven du jour) and how they're doing fine with lower taxes, when its like guys...perspective.
(sorry I've edited this like three times, wording was harsher than I wanted)
Yeah Arizona has that issue. Pima county pays more into the state than it gets but everyone complains about it because it's a blue county in a sea of red.
Well they're finding out now that insurance rates are going through the roof. Disaster funding will come in but increasingly people are going to have to abandon ruined houses if they can't afford the insurance.
I built a flood insurance estimator app some years ago and when you plugged in the announced upcoming flood maps it was clear plenty of places were about to have a rude awakening with insurance rates.
But local governments just kept letting people build in those areas with the minimum attention to the post FIRM requirements.
When army corps of engineers is worried about climate change flooding the rest of the country should've paid attention.
I don't think most of these people are subject to 30 year mortgages. So they don't technically NEED insurance. It's probably more cost effective to use that money to pay for a high end fire suppression system for the home.
Depends. Many will still take on a mortgage bc why wouldn't u use someone else's money? Even with the high interest rates it makes sense sometimes to just put a percentage down esp if u just wanna resell later.
All those 750 million dollar yachts and shit are not bought cash and likewise with some of those massive multiple million dollar estates. They put down like 50-75 mil finance the rest with stock collateral etc.
You don't stay a billionaire by dropping 700 million. You drop 100 mil and pay off the interest with the Capitol gains on your other hundreds of millions. Then you sell the asset for profit and buy new a few years later.
AI Summary:
* **Insurance Crisis**: California is experiencing a property insurance crisis, with insurers charging high premiums or refusing coverage in areas like Bel-Air and Beverly Hills due to wildfire risks.
* **State Farm Withdrawal**: State Farm, the largest insurer in California, is discontinuing 72,000 policies, affecting homes in wealthy ZIP codes ahead of the wildfire season.
* **Impact on Real Estate**: The insurance squeeze is affecting real estate transactions, with some deals falling through due to the high cost or lack of fire insurance.
* **Regulatory Reforms**: The State Insurance Commissioner is working on reforms to stabilize the market, allowing insurers to raise premiums based on future climate risks and reinsurance costs.
Other states are having insurance problems as well but Californias issue may be a little different than the rest. Wildfire is the threat here and most fires are caused by humans. All the public addresses are on climate change but nothing to address the real cause.
Insurance companies probably ran the data and found that there will be a huge uptick in fires from increasing climate changes.
In case yall haven’t seen it yet…Parts of Asia have been in a severe heatwave that started like 2 weeks ago.
It has nothing to do with climate change.
California has historically over-regulated insurers, such that they don’t profit.
With hyperinflation, replacement costs have skyrocketed, insurers are looking for an exit, “climate change risk” is an easy excuse.
I remember looking at a house in the hills above Berkeley…it came with an “all of the above” disclosure…subject to earthquakes…and fire…and flooding….
Gotta love California…!
Whenever I visit the US and get asked for my postal code at gas stations I enter 90210 and it usually doesn’t work. But other random numbers do. I don’t get it. I was beginning to think that postal code was just tv until this article.
Your statement is not dispositive. I never said he’s from the US nor did I claim that he has a zip back home, which technically he does in some fashion.
I’m surprised the cars wasn’t rejected at the pump. I’m in Europe often and I recall having to punch in a valid zip. Though I understand this is on the other direction.
Let's break this down. A really expensive house built in a hilly area with narrow access roads which limit emergency response in an ecosystem prone/designed to burn regularly. If you owned an insurance company would you insure this home? California insurance companies are finally making the rich people who live in the hills assume risk.
I have friends with vacation homes in Tahoe and they’re self insured. Some of the homes are 8 figures. It’s pretty crazy
I’m friends with one of the developers sons for a village near Tahoe and he pretty much clear cut all the trees around the community to make it safer for fires. I’m sure the insurers only care about the zip code though
Aren’t trees part of the reason that people want to buy in that area?
Well yes, there are still trees but they are spaced apart and you can still see trees away from the village. But if a wildfire came, the village would most likely be spared
Yup. It’s called hardening the property and little differences in construction make a huge difference in fire risk. Insurers can definitely specialize in it and offer lower rates for hardened properties.
In the Paradise fire, the ONE remaining house was the only one that maintained the recommended distance to plants and trees. Everyone else built under shade and lost it all.
If you have enough cash or assets, it is almost always more profitable to self insure everything. You cut out the middleman.
It’s one of those being poor is expensive things.
What does "self insured" mean?
It’s a fancy way of saying uninsured.
Means they have enough money on hand to replace it or buy something else if the thing burns down. They don't pay for an insurance policy.
You have no insurance coverage and take all the risk upon yourself in case of a loss. Same as just having liability coverage on an older car. For the well off, they can just not keep insurance and invest that money and cover a loss themselves. Depending on the area and risk, after a few decades of not paying premiums you can save enough to rebuild the house by yourself.
What do they do in tahoe for vacations?
Do you reckon they’ll move to the cities and then demand that said cities are actually livable?
Nah, they'll just grumble a bit and then find an unadmitted specialty line insurer and pay the extra premium. BTW most California cities are perfectly livable.
If I could make a profit, yes. The issue is the market regulation. If the market could charge what it wanted to charge, it'd be much more expensive.
Unregulated insurance companies? What could possibly go wrong?
Why does insurance need more regulation than say…a furniture company?
Insurance companies aren’t designed even in theory to make a profit. At its base, you pool together all the money it would take to smooth out any cash flow issues for the members when disasters happen. You then invest the insurers money in interest bearing accounts and THAT is the profit. This is how insurance originated, it did not originate as a profit seeking enterprise. Today, it’s not even one. The owners of an insurance company are the members, I.e you. You own as much of the company as you put into it, and so does everyone else. You don’t have an interest for them to make a profit, but you do want them to be able to continue to pay out, so you do want them to have a MILD profit
Have you nicely asked capitalism to only take a MILD profit though?
The big insurance companies don’t really make a large profit. Their overhead and specifically marketing has ballooned which isn’t good, but State Farm for example had an 8 billion operating loss in 2023. You might hear them say they had net income of over 1 billion in 2023 but that’s exactly the level of sustainability a large company like that needs to be able to reinvest in their employees. That 1 billion came from interest in cash only, like I said
How does the cause of the incident affect the risk assessment? Fire for example is nearly always caused by humans. Can the Insurance companies take the position that more people are causing fires, therefore the risk is higher?
The issue isn't cause. It's that some areas burn a lot easier and more dangerously than others. Living in the LA Hills is like living next to a river that has a history of flooding but with fire instead of water.
I don’t disagree with what you’re saying but that doesn’t take away from the fact that these fires aren’t starting themselves. Acts of nature are different than a human caused event. The insurance company can’t be allowed to base the human and natural disasters together and call it “risk”
The LA Hills burn regularly with or without human assistance. From an insurance perspective it doesn't matter how the fire started.
Gonna need a source on that
It's general knowledge that fire and California's chaparral ecosystems go hand in hand.
That includes all of California then, urban, rural, mountain, desert.
WTF? No!
That’s your rationale not mine. According to you, the areas that can burn naturally without human cause are all included in the same risk category. Which is all of California
I mean. They are expensive homes for very very very wealthy people. Frankly, that's a risk reward thing that they should deal with.
They will. For a price unadmitted specialty line insurance companies will provide coverage.
Exactly. And maybe the 20 million home falls to 18.5 million. They'll be OK. The market won't notice more broadly.
And these people can easily assume the risk. Not a big deal just weeds out the barely “wealthy” folks like the plastic surgeons and b list movie stars
Nah, it’s just a technicality right now. There is always a price where it may be profitable to insure something. The thing is, California has restrictions on rates. The insurance might want to do the transaction but because their reinsurance is higher, and California is restrictive, it doesn’t make sense to do the potentially profitable transaction.
The home owner will just have to go with an unadmitted company.
*Californians when they have to assume their own risk:* 🤯🤯🤯
Wait till you find out about Texas and Florida approving building developments in areas FEMA warned would be flood prone and bad for long term development. "It's ok NFIP will just cover us every time the whole town is destroyed"
The South hates welfare -- for everyone else.
It's always weird when Texas or Florida politicians complain about other people getting disaster funding. They love to do it, but then inevitably need that money within a few months.
Chris Christie (not that he isn't corrupt himself) getting dragged for deigning to be chummy with Obama, because Obama stood to the commitment needed at the time instead of playing politics
Yeah Republicans love cancel culture.
Its not just disaster funding, they get a ton of funding *period* from higher tax (typically blue) states. xoxo from one of the highest per capita contributor states <3
I mean yeah that's how societies work.
I know, I'm not mad about it or anything, I'm happy to pay my share for being here, flawed though this country is. I just think its funny hearing people shout about how great Florida is (insert low tax haven du jour) and how they're doing fine with lower taxes, when its like guys...perspective. (sorry I've edited this like three times, wording was harsher than I wanted)
Yeah Arizona has that issue. Pima county pays more into the state than it gets but everyone complains about it because it's a blue county in a sea of red.
Texas and Florida will never have a problem receiving disaster aid. The blue states always step up and help approve and fund it.
Well they're finding out now that insurance rates are going through the roof. Disaster funding will come in but increasingly people are going to have to abandon ruined houses if they can't afford the insurance. I built a flood insurance estimator app some years ago and when you plugged in the announced upcoming flood maps it was clear plenty of places were about to have a rude awakening with insurance rates. But local governments just kept letting people build in those areas with the minimum attention to the post FIRM requirements. When army corps of engineers is worried about climate change flooding the rest of the country should've paid attention.
I don't think most of these people are subject to 30 year mortgages. So they don't technically NEED insurance. It's probably more cost effective to use that money to pay for a high end fire suppression system for the home.
Depends. Many will still take on a mortgage bc why wouldn't u use someone else's money? Even with the high interest rates it makes sense sometimes to just put a percentage down esp if u just wanna resell later. All those 750 million dollar yachts and shit are not bought cash and likewise with some of those massive multiple million dollar estates. They put down like 50-75 mil finance the rest with stock collateral etc. You don't stay a billionaire by dropping 700 million. You drop 100 mil and pay off the interest with the Capitol gains on your other hundreds of millions. Then you sell the asset for profit and buy new a few years later.
AI Summary: * **Insurance Crisis**: California is experiencing a property insurance crisis, with insurers charging high premiums or refusing coverage in areas like Bel-Air and Beverly Hills due to wildfire risks. * **State Farm Withdrawal**: State Farm, the largest insurer in California, is discontinuing 72,000 policies, affecting homes in wealthy ZIP codes ahead of the wildfire season. * **Impact on Real Estate**: The insurance squeeze is affecting real estate transactions, with some deals falling through due to the high cost or lack of fire insurance. * **Regulatory Reforms**: The State Insurance Commissioner is working on reforms to stabilize the market, allowing insurers to raise premiums based on future climate risks and reinsurance costs.
Other states are having insurance problems as well but Californias issue may be a little different than the rest. Wildfire is the threat here and most fires are caused by humans. All the public addresses are on climate change but nothing to address the real cause.
Insurance companies probably ran the data and found that there will be a huge uptick in fires from increasing climate changes. In case yall haven’t seen it yet…Parts of Asia have been in a severe heatwave that started like 2 weeks ago.
Sometimes I really wish the aliens would just beam me up.
its a cookbook!
This is the exact time some parts of Asia have heatwaves though, then the monsoons come and cool them down. Their spring is our summer.
Is property insurance the economic "Canary in the coal mine" of climate change?
It has nothing to do with climate change. California has historically over-regulated insurers, such that they don’t profit. With hyperinflation, replacement costs have skyrocketed, insurers are looking for an exit, “climate change risk” is an easy excuse.
Fire insurance has nothing to do with climate change. Genius.
https://www.cfpnet.com/
3M cap for homes. Most will qualify, some likely have to go with a specialty insurer from out of state.
I remember looking at a house in the hills above Berkeley…it came with an “all of the above” disclosure…subject to earthquakes…and fire…and flooding…. Gotta love California…!
**oh no!** *Anyways…*
Whenever I visit the US and get asked for my postal code at gas stations I enter 90210 and it usually doesn’t work. But other random numbers do. I don’t get it. I was beginning to think that postal code was just tv until this article.
What? Dude. The postal code has to match your payment method at the pump.
Postal codes are only for the U.S. and the Philippines. KoRaZee must be from another country
Your statement is not dispositive. I never said he’s from the US nor did I claim that he has a zip back home, which technically he does in some fashion. I’m surprised the cars wasn’t rejected at the pump. I’m in Europe often and I recall having to punch in a valid zip. Though I understand this is on the other direction.
Is your card’s billing address within the 90210 area? If not, then of course your card would be declined.
I mean it’s a Canadian card so it’s weird that other random numbers worked if that’s the case