Climate risks have made California uninsurable. When will we wake up?

State Farm, the country’s largest property insurer, announced this week that it will almost entirely stop issuing new policies in California, the country’s largest property insurance market. The reasons for forgoing all that new business are entirely economic. The company cited “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market”. Those things are owed largely to the wildfires engulfing bigger parts of the state in bigger chunks of the year.

California’s woes have a lot to do with the climate crisis, which fuels the hot, dry conditions that turn wooded hills into kindling. It’s also a political failure. Housing crises in the Golden state have pushed more and more people out of densely populated areas and into the so-called wildland-urban interface – places that are cheaper to live in, and more prone to burn. Wealthy homeowners in fire-prone enclaves are also reluctant to move, keen to keep rebuilding properties that keep getting destroyed.

Similar dynamics are playing out around the country. Insurance companies are hiking up costs or wholly withdrawing from some areas after deadly, costly flooding in Appalachia and hurricanes in Louisiana and Florida, where property insurance rates are now roughly triple the national average. In each case the rich will make out all right, for now, able to pony up the cost of more expensive policies or relocation. The rest will find themselves on the losing end of what happens when the private sector is entrusted with planning for climate chaos.

State Farm didn’t mention climate change in its announcement, of course. The sector has been under pressure from rightwingers that have attacked private sector initiatives like the Net Zero Insurers Alliance (NZIA) as a plot by shadowy globalists to enforce a radical climate agenda through undemocratic means; more concretely, Republican lawmakers are engaged in sabre-rattling premised on the notion that such alliances constitute a violation of antitrust rules.

Owing to such pressures, 11 global insurers have left the NZIA since March. The irony of the Republican crusade against all things ESG (environmental, social and governance investment principles) takes flashy corporate climate pledges at face value, alleging that Wall Street is substituting ideology for what should be a focus on the bottom line. But ESG, for companies, is all about protecting profits. State Farm – which touts its own ESG commitments – is leaving California, it said, “to improve the company’s financial strength”.

Republican lawmakers are trying to ban companies from making similarly pragmatic considerations of climate risk in their planning. Governments, meanwhile, have been slow to do much climate planning at all. There is no comprehensive federal plan to house people – let alone whole communities – wiped out by climate-fueled storms and floods, despite the fact that some 13.1 million people could be displaced by sea-level rise through the end of the century.

When governments don’t plan for such events, corporations fill the gap, raising prices and deepening existing inequalities. Even the relatively well-off will be left to navigate a thicket of piecemeal, neglected public programs and private-sector middlemen to rebuild their lives.

Rising prices and coverage gaps aren’t some moral failure on the part of State Farm or any other for-profit firm, just business: these companies exist to return value to their shareholders. The government’s job, though, is to protect its people. That it’s failing to do that now doesn’t bode well for an even more climate-ravaged future.

cover photo:The government’s job, though, is to protect its people. That it’s failing to do that now doesn’t bode well for an even more climate-ravaged future.’ Photograph: Ethan Swope/AP