Hi y’all, welcome!

Today is going to look a little different - we will dive into the California fires and how the climate crisis is reshaping homeowners insurance. We will be back to regularly scheduled programing next week. Hope to see you then.

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WHAT'S INSIDE

• 🚨 CLIMATE CRISIS RESHAPING HOMEOWNERS INSURANCE

• 💵 HOW TO HELP

🚨  CLIMATE CRISIS RESHAPING HOMEOWNERS INSURANCE

This is a departure from our regular content - but I would be remiss not to speak about it.

As of writing 1/16/25 - winds are easing in Los Angeles and firefighters are starting to make progress. It’s still too early to know the true significance of the destruction. Daniel Swain, a climate scientist from UCLA, predicted these fires will be the costliest in U.S. history. AccuWeather estimates losses between $250-275 billion.

Across the US, home insurance rates are increasing and experts agree that climate change is changing the way homes are insured. Once in a generation disasters are becoming increasingly common and these risk factors are passed from insurance companies to policyholders.

According to the National Bureau of Economic Research - the massive losses from California’s 2017 and 2018 fire seasons raised concerns about the insurability of catastrophic wildfire risk. These losses wiped out “more than a quarter century of cumulative profits for the insurance industry - twice over” per Carolyn Kousky of the Environmental Defense Fund. Listen, I’m obviously not suggesting we feel bad for the insurance companies but knowing they are taking huge losses means we can predict their next moves: raising your rates and cancelling policies.

Speaking of cancelling policies…pre-fires, thousands of insurers chose not to renew home insurance policies in fire-prone areas. Rising costs and cancellations left many future fire victims without adequate coverage.

Last year - Francis Bischetti learned his annual cost of homeowners insurance was going from $4,500 to $18,000. Unable to afford this, he turned to the California FAIR Plan. The California FAIR Plan is meant to address this affordability gap in the market but offers fewer benefits. This plan is not without fault - in order to qualify, Bischetti would need to cut down 10 trees around his roof line to lower his fire risk. The 55-year old could not afford this and was left without coverage when his home burned during the fires. He isn’t alone. Many homeowners in fire-prone neighborhoods struggled to maintain their insurance and many reported being dropped by their policies last year.

The state’s largest home insurer, State Farm General, announced in March that it would not renew 30,000 homeowner and condominium policies — including 1,626 in Pacific Palisades — when they expired.

It’s not just California - across the country - rates are rising. Florida and Louisiana have been particularly hard hit during hurricane season and are seeing similar levels of market instability. Since 2017 - over 30 insurance carries have voluntarily withdrawn from Florida. This means it’s harder and more expensive to get coverage and Floridians pay the highest premiums in the U.S.

What about Texas?

Texas is among the states with the steepest increases in homeowners insurance premiums since last year. This week, Austin Firefighters Association President Bob Nicks warned Austin - “Austinites should internalize that what we see in LA…could happen to a large degree here in Austin.”

He said “Austin is considered one of the 5 highest risk in the nation (the only one outside of California) to have the chance of catastrophic fires.” He pointed to Bastrop to remind us that when all conditions come together - it is similar to what we are seeing in LA.

With rising risk comes rising insurance premiums:

Per Axios nearly 88% of properties in the Austin metro area could be facing higher insurance premiums or policy non-renewals due to the risk of fires, winds and flooding.

This may be one of the first times we are meaningfully seeing climate change impacting our finances and it’s clear that this problem isn’t going away for insurers or homeowners. How California recovers from this crisis will set the tone for how insurers tackle the rest of the U.S.

💵 HOW TO HELP

Although official damage assessments are still ongoing, the California Department of Forestry and Fire Protection estimates that more than 12,300 structures have been damaged or destroyed in the Palisades and Eaton fires.

Many homes and lives have been lost in this catastrophe - you can find resources on how you can help here:

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