As climate-related disasters grow in frequency and intensity, California’s ongoing battle with devastating wildfires speaks to an impending crisis — an insurance system on the brink.
The issue is making recovery increasingly difficult for homeowners and communities. According to the National Oceanic and Atmospheric Administration (NOAA), the U.S. experienced 28 weather and climate disasters in 2023 that exceeded $1 billion in damages. Analysts estimate property losses could reach $35 billion, while the total economic impact may climb as high as $275 billion.
Now high-risk areas are turning into insurance deserts, and thousands of homeowners are left struggling to secure coverage and rebuild their lives.
In response, major insurers such as State Farm have withdrawn from some of these high-risk areas, leaving thousands of homeowners in limbo. Experts warn that the impact of these disasters extends beyond the individual homeowner and affects entire communities.
“There are no stores, there are no facilities, there are no services,” said Dr. Sheldon H. Jacobson, a data analysis and risk assessment expert from the University of Illinois Urbana in Champaign. “These towns are going to experience a horrendous economic depression. It’s not a matter of rebuilding, it’s a matter of rebuilding a community, and insurance can’t pay for that.”
Meanwhile, some residents are turning to state-backed insurance options like the California FAIR Plan, which provides limited coverage at higher rates. Some view this solution as unsustainable, as the plan neglects the growing demand brought on by climate change.
The financial strain is not limited to California. Rising premiums are impacting policyholders nationwide, with insurance companies extending the risk to customers across all 50 states. As climate-related disasters become more frequent, insurance costs will continue to rise for everyone.
In response to requests for relief, House Speaker Mike Johnson has suggested requiring California make certain changes before sending wildfire aid. Johnson believes both state and local LA leaders have been neglectful in water resource and forest management.