Press Briefing: Is Insurance the Next Big Climate Story?

Transcript

Mark Hertsgaard: Hello, and welcome to another Talking Shop with Covering Climate Now. I’m Mark Hertsgaard. I’m the executive director at Covering Climate Now, and also the Environment Correspondent for the Nation magazine. We’re talking today about the insurance crisis as it relates to climate change. We’re very glad that all of you are with us.

And I want to just say, before we get into that, for those who may not know, Covering Climate Now is a global collaboration of more than 500 news outlets that reach a total audience of billions of people a day. We’re organized by journalists for journalists to help all of us do better coverage of the defining story of our time. You can go to our website coveringclimatenow.org to see a list of our partners to apply to join this collaboration, to participate in our annual awards program, and to sign up for our newsletters and newsroom trainings, all of which are free of charge.

Now to insurance and climate change. Weather forecasters in Southern California are saying today that the region continues to face a high risk of fires thanks to exceptionally dry and windy conditions. But meanwhile the megafires of the past two weeks have already demonstrated that an overheated planet threatens not only people’s lives, but also their access to affordable insurance. Absent fundamental reforms, homeowners, renters, and even the world economy stand to suffer.

The Financial Times reports that a key global watchdog, the Financial Stability Board in Switzerland, has said that climate change is, quote, “increasingly likely to trigger broader panic in financial markets,” unquote. It’s not that complicated: property that can’t be insured cannot obtain a mortgage. It’s also all but impossible to sell that property without cutting the price to pennies on the dollar, and since homes are the single largest asset for most households in the United States, slashing their resale value could crash housing markets.

Experts fear that if so-called climate insurance bubbles, the ones that are now emerging, perhaps in California and Florida and other high-risk areas. If those bubbles pop, that could trigger knock-on effects that threaten the global financial system, much as the housing bubbles in various parts of the world crashed the global economy in 2008.

Okay, I realize that’s a lot of economics to throw at you all at once. So to bring this into sharper focus, let’s watch a 90 second clip that our colleagues at CBS News, one of our key partners at Covering Climate Now, have done on this. Last year, Ben Tracy, then CBS’s National Climate correspondent, visited a mountain community east of Los Angeles that insurance companies were already fleeing. Take a look.

CBS piece: Adriana, good morning. You know, scientists say that climate change is fueling this pileup of more intense disasters, and that’s causing a reckoning for insurance companies that also face higher costs to rebuild homes due to inflation. They’re now either jacking up premiums for disaster coverage or pulling out altogether in places where the risks are now just too high.

“I love the trees, it’s green, it smells wonderful.” When Mary Morse looks at the groves of trees surrounding her home, she sees the reason she moved to this Southern California mountain town 17 years ago.

“It’s just a magical place to live.” But when her insurance company looked at those very same trees, it saw fuel for a potential wildfire.

“I got a letter from my insurance company that said, we’re not going to serve your area anymore.”

“They’re basically dropping you.”

“Yep.”

In California, where state regulations prevent insurance companies from rapidly raising premiums, several are no longer writing new policies or pulling out of the market completely. Some of the highest risk zip codes have seen a nearly 800% increase in policies not being renewed.

“They’re looking at it and saying, ‘Listen, we’ve done the math. We can’t underwrite policies that we know we’re going to lose money on.’” Matthew Eby is the CEO of First Street Foundation. His report warns that America’s climate insurance bubble could soon pop as high-risk properties are dropped by private insurers and pushed to more expensive state-created plans known as the insurers of last resort.

“Are we one strategically placed hurricane or one massive megafire away from some of these state-backed plans collapsing?”

“Absolutely. All it takes is one big event in a high-concentrated area, and you will see financial collapse of those programs.”

Mark Hertsgaard: Very prescient reporting from a year ago, but this is not a new wrinkle in the climate story. Insurance companies in Europe have been warning since the 1990s that unchecked global warming could unleash so many more and more destructive storms and fires and other extreme events that the companies would have to limit how much insurance they provided. I know that because I wrote a piece for the Washington Post in 1996 that was, I think, the first on this subject to appear in the non-specialist press. And now, 30 years later, those warnings have become reality in more and more of the world, and we, as journalists, have got to catch up to the story.

Of course, this is a story for business and economics reporters, but it’s also a politics story. Government officials have made taxpayers the insurers of last resort in California and Florida, and other jurisdictions like the European Union are considering similar policies.

How would that work? Is it wise? These are some of the questions that cry out for focused follow-up reporting? But this is also a climate justice story because when insurance becomes unaffordable or outright impossible to obtain, renters and others on the lower end of the economic spectrum suffer disproportionately, and that’s true as well for governments in poor or highly vulnerable countries that need insurance for critical infrastructure projects.

So at today’s webinar, we’re going to give you journalists, our fellow journalists here the background knowledge and some practical tips that can get you up to speed on this story. In the first half hour I’ll be posing questions to our superb panel and of four panelists today, and in the second half hour we’ll be taking your questions.

Now to submit your questions, please go to the Q&A button at the bottom of your screen, and please, please include not only your name, but the name of your news outlet. I’ll read them out for the panelists to respond to, and I’ll just emphasize while this briefing is a public event. We will only be taking questions from working journalists. Thank you for honoring that. And afterwards we will be Covering Climate Now, we’ll be providing a video of this event and a full transcript for anyone who RSVPed to it.

So with that, now let me introduce our panelists. First, Anita Chabria. She’s a California columnist for the Los Angeles Times. She’s based in Sacramento and her 2023 series on rebuilding after wildfires won a Scripps Howard award.

Next, Christopher Flavelle. He is a reporter at the New York Times, where he writes about how the United States tries to cope with the consequences of climate change, including the effects on the insurance industry.

And Dave Jones, he’s the director of the Climate Risk Initiative at UC Berkeley School of Law’s Center on Law, Energy, and Environment. From 2011 to 2018 he served as the Insurance Commissioner for the state of California.

And Leslie Kaufman. She’s the senior climate reporter, senior climate change reporter, rather, for Bloomberg Green in 2024. She was the lead author of its series Uncovered, which investigated the growth of state-backed insurance plans of last resort and the accuracy of catastrophe modeling. Now please join me in giving all of our colleagues a warm, virtual welcome.

Okay, let’s get rolling. So, Dave Jones, I’d like to start with you. You’ve been watching this insurance crisis grow for a long time. Now, as the Insurance Commissioner for California, I think you were the first regulator to demand climate risk assessments from insurance companies. Do you share the view of the Financial Stability Board as quoted in that Financial Times story and the view of the First Street Foundation in that CBS story that climate-fueled weather disasters, in fact, could tank housing markets, and perhaps the entire world economy? Is that your view as well?

Dave Jones: Yes, there is a broad consensus across financial regulators across the globe, including in this country, at least until the recent change in administration, that climate change poses systemic financial risks to the global financial system, to the US financial system and to financial institutions.

The insurance channel for that risk is as your segment described, and as the journalists on this call have ably described in their reporting, insurers react in two ways to increase losses driven by climate change. One, they raise price, and two, they stop writing insurance and they stop renewing insurance. And both those things are happening across the United States at various levels of acuity based on the severity of the extreme weather-related events that are being driven by climate change, which in turn are being driven by global temperature rise and our failure to transition from fossil fuels and greenhouse gas emitting industries. Chris, the New York Times, has done some terrific reporting with colleagues last year, identifying 18 states in which this phenomenon is happening. So it’s not just Florida, Louisiana, the Gulf and Atlantic states. It’s not just the western states, California, Oregon, Washington. But these catastrophic events are falling across the United States. There really is no area that’s immune to it. And as a result, we’re marching towards an uninsurable future in the United States and across the globe.

Mark Hertsgaard: My follow up question. Let me just say, let me remind my fellow journalists who are on this call. If you want to put questions for the second half of the hour, please put them in the Q&A function at the bottom of your screen. So Dave Jones, as you know the California state insurer of last resort, which is known as the FAIR Plan, only has about 700 million dollars in cash reserves at the moment, I think.

Meanwhile the Pacific Palisades neighborhood, where the first big fire hit has nearly 6 billion dollars in insurance exposure on its own, and the total losses from the Southern California fires have been estimated at roughly 250 billion dollars compared to 700 million dollars that the state insurer has on hand.

Today you published a really must read opinion piece in the New York Times. You urge governments and even the insurance companies themselves to sue fossil fuel companies to compel those companies to cover those losses, because, as you write in the piece, those fossil fuel companies have caused this. They knew their products were going to cause it, and they, instead, for decades, have misled the public and the press and policymakers, and so forth.

So, bearing in mind that we’re all journalists on this call, what do journalists need to know in order to explain that evolving story to our audience as we go forward? This, this suggestion that you make about the way to solve this, the way to square that circle is to sue the fossil fuel companies.

Dave Jones: Well, first, as the journalists on this call and others have written about, there’s a very robust body of climate science that concludes that the emissions from fossil fuel companies are substantial contributors to the overall emissions that are driving global temperature rise. And it’s that global temperature rise that’s causing more extreme and severe weather-related events that is killing more of us, injuring more of us, damaging more communities, sometimes wiping out whole communities and causing insurance companies to jack up prices and to stop writing insurance. So, having some familiarity with that climate science is a first goal, I think.

Second, there’s a strong body of reporting, as well as congressional reports and other investigative reports, that demonstrate that the oil majors knew that their emissions were going to cause this very outcome, and yet they misled, deceived, and lied to the American public about it. And so again, there’s a body of reporting, as well as a body of third party independent investigations that have revealed and exposed that Exxon and others knew internally, as far back as the seventies that this was going to occur, and then deceived the public about it. I think the third thing to understand is what’s happening across most, if not all, insurance markets in the United States is this phenomenon, where, as losses go up, insurers pull back and raise prices, and then a little bit about residual markets or fare plans.

35 states have enacted FAIR plans or residual markets. They’re not state agencies. They’re not taxpayer funded. They’re not typically backed by the state government. They are state statutorily-created private associations of the insurance companies in that state. And basically they’re set up to provide a place for people to get insurance when the private insurers decline to write the riskier risks. The goal is to make sure people aren’t shoved into the void, and they have some place to go.

Technically, residual markets or FAIR plans cannot go insolvent. They can run out of money, but every state has statutes that provides that in the event they run out of money, they can assess the member insurers in that state based on market share, except for Florida, Louisiana, and California, which have adopted laws or rules that provide that, instead of holding the insurance companies accountable for any shortfall of funding based on market share, the FAIR plans can go directly to policyholders. And that’s a big policy change in California, one that I think most Californians don’t understand, and, as you just said, the FAIR plan in California reportedly had about 377 million dollars in reserves.

It allegedly has 2.5 billion in reinsurance. But there’s a 900 million dollar deductible for that reinsurance, which they do not have. And so they’re going to trigger the assessment. A small share of that assessment will fall on insurance companies, about 500 million, but beyond that it falls on all policyholders in the state.

And so that’s an example. This trigger has been pulled in Florida in the past as well, and in other states that have FAIR plans, they could find themselves in a similar situation, where making sure that the claims of people that are covered by FAIR plans results in shifting the burden to all policyholders in the state, in addition to the rising rates and premiums that they’re having to pay as insurers jack up the rate. So it has enormous financial consequences.

We’re starting to see some evidence of mortgage defaults because people who got a 30-year mortgage thought they understood what it was going to cost to have that mortgage. Now their insurance costs are going up. Mortgage contracts require you to have insurance, and so if you can’t afford your insurance, the mortgage company force places the insurance that costs even more. And so we’re starting to see some evidence that people simply can’t sustain their mortgage payments. So that’s one channel through which this risk could flow through insurance. Homeowners, mortgages, mortgage lenders, and then, to the extent the mortgage lenders are shifting those mortgages to the secondary market, Fannie Mae and Freddie Mac, ultimately to federal taxpayers.

Mark Hertsgaard: So, to be clear, it sounds like I somewhat misspoke earlier that the losses are not going to at least state taxpayers as much as state insurance policy holders, and ultimately, perhaps, to federal taxpayers. Is that correct?

Dave Jones: Yeah, the FAIR plans, if they run out of money, go to the insurance companies, or in these three states I described to all policyholders. These entities are typically not backed by the general fund or taxpayers of the state. The way that federal taxpayers might be on the hook is through this distribution of risk that I just described, where if, in fact, we begin to see substantial numbers of mortgage defaults that impacts mortgage lenders, many mortgage lenders have shifted their mortgage loans into the secondary market, Fannie Mae and Freddie Mac, and so they end up having to deal with the default. But that’s not happening in a crisis fashion just yet, but that we’re beginning to see some evidence of that. But the federal taxpayers are not on the hook for FAIR plan or residual market shortfalls.

Mark Hertsgaard: Okay, so that’s Dave Jones, the former Insurance Commissioner of the state of California. For all of us as reporters, you can hear. You know, we have to give our audiences news that they can use. This is news they can more than use, that they need to know that they are facing a lot of potential financial costs here. So that’s the channel to lean into as we do this coverage.

I’m going to shift now to Leslie Kaufman of Bloomberg Green, and Leslie, I’m going to start by saying that everyone on this call should be reading the amazing piece that you and your colleagues did last March, titled Uncovered, and it was about how these state insurers of last resort are absorbing trillions of dollars in risk. You’re one of the few journalists, Leslie, who’s done a real deep dive on this subject, with an eye towards helping our fellow journalists on this call to do similar reporting, but focused on their own communities or market areas. Could you summarize the findings in that piece, and what they suggest about covering this story going forward?

Leslie Kaufman: Well, thank you, and thank you for reading it. Not everyone wants to read long in depth coverage on FAIR plans. But we began looking at this. A lot of what’s happening insurance right now is an enormous shift of risk away from insurance companies to these state backed plans and ultimately to consumers, and we’re seeing that in a lot of ways the FAIR plans for us began as a warning. We began seeing the numbers in the FAIR plans go through the roof. The California FAIR plan is a great example. The amount of exposure they have has basically quintupled since 2018. So when I say exposure, I mean if everything burned, how much they would owe. Now, obviously not everything burns at the same time. But what we’re looking at is who is having to carry this risk.

We’re seeing these numbers go up in states, and the reason is, as we’ve discussed, insurers are getting more strategic. First, they’re charging more. They’re cherry picking more. They have models, and we’ve, are in series, covered these models as well. That helps them tell where the risk is. So they’re moving away from these risky policies, and they can do it in a lot of ways they can charge more. They can non renew. There’s a lot of ways for them to sort of shift the risk out, and someone has to come in and take that risk.

And sometimes it’s the state-backed plans, and what we found in those plans is, while there’s a lot less surety about how they’re going to pay, I heard Dave talk about it when we talked to Nancy Millman, who’s a consultant, Nancy Watkins is a consultant with Millman. She talked about, sort of wishful thinking about how these things would be paid down the line. Yes, a lot. Some have assessment power, some of assessment powers on insurance, but it’s a lot of risk that people don’t want to think about. States want cheap insurance. They want people to stay in the state. They don’t want to think a lot about the long term consequences and the hard decisions they have to make down the line.

Mark Hertsgaard: So this is a story that you know, as Dave Jones was indicating is really important for markets all around the country. But I think a lot of us, to be frank, are going to be a little intimidated, as sort of especially if we’re a general assignment reporter, we’re going to be intimidated about. You know the complexity of this? We showed that Ben Tracy CBS piece earlier in this hour, in order to say, look, you can actually do this as a general assignment reporter. But, Leslie, with that in mind, can you give some sort of specific tips about where to go for sources, where to go for valid information about this, who to talk to beyond? Obviously people should read your piece, and all the other reporting on that again. Look in the chat. We’ve got it right there for all of you. But could you, just, you know, imagine, if you were out for drinks with some colleagues after work, and they were asking you, gee, I really think this is an important story, but I don’t know how to get started.

Leslie Kaufman: Well, every state has an insurance commissioner, or at least the states that have really struggled with this, I found that those people can be a great place to start in Florida. They keep actually very excellent public records in California. Laura’s office doesn’t always want to talk, but they do have information, and they can be a good source. So I found that those are good places to sort of start your conversation and take a look. There are, of course, national associations that deal with insurance.

The Insurance Information Institute, which is actually put together by the insurers, publishes a lot of information on insurance. I also personally find that the reinsurers, that is, the people who insure the insurers keep very good tabs on the industry, and they put out a lot of trend reports that give you information. On top of that there have been Federal Reserve reports. The Federal Reserve obviously has some real concerns. They own a lot of the risky real estate. Now that is underinsured. I think that the Treasury Department just put out a big report. I don’t think that’ll happen under Trump. Senator Whitehouse has very much cared about this issue, and has kept on it again. He is no longer in the majority, but those are some of the sources I would start with.

Mark Hertsgaard: Thanks so much. That’s Leslie Kaufman with Bloomberg Green, and for our colleagues who may be joining us from overseas, especially Europe, but also in the Global South. Another source to consider again in the reinsurance industry, those are the insurance companies that insure the insurance companies, is at Munich Reinsurance. Munich Reinsurance, a man named Ernst Rauch, R-A-U-C-H. Ernst Rauch, Bloomberg. We’ll try and bring this up. Bloomberg. Your colleagues at Bloomberg TV, Leslie did a good interview with him about a year ago about these very issues, and I mean he has been following this since the 1970s and trying to sound the alarm. So look there as well. Okay.

Shifting now to Chris Flavelle at the New York Times, and Leslie just mentioned Senator Whitehouse of Rhode Island. Chris, you did a piece, a really good piece not long ago. That was kind of pegged to this report that Senator Whitehouse, released from the US Senate Budget Committee, and it provided a very cool map of communities across the US where insurance companies have dropped customers. I say cool, not because those customers were dropped, obviously, but because journalists and others can now look at those maps as really a font of story ideas for digging down into this emerging crisis. So could you talk a little bit about that, Chris? And how specifically not just the report, but how journalists elsewhere might be able to use it in their work, going forward.

Christopher Flavelle: Yeah, sure. Thanks for having me on this. It’s a privilege to be here with really impressive people. The story that you’re referring to, we got early access to some data that Senator Whitehouse had compiled and was releasing.

Looking specifically at what’s called non-renewals. Leslie sort of hinted, this idea of people being dropped. We knew, and had been negotiating for a year to get access to this data because it was not otherwise available, and the goal was to show our readers where in the country insurers are dropping existing customers at the greatest rates. The lesson that I would suggest for people covering–this is, I think, at the outset of any story you’re doing–ask yourself which way you’re going. You’re either going to do sort of a general story that maybe looks at trends that are already known. But you’re investing at a local level. We didn’t really have time with the stories we did last year to dig down into specific states or areas in the states. We did mostly national stories. So there’s always value to be had in covering the effect of a trend like non-renewals that’s known nationally. But to ask what’s happening in a state or a city, and why it’s happening, what the effects are. That’s one way to go, a different way to go, and that’s been our approach. And Bloomberg as well is to look at something that isn’t, find something that’s new, right? So for us, last year we had 3 big pieces on insurance and climate change.

One which you mentioned was covering the new data on non renewals. Another was covering new data, showing how much households pay for insurance around the country, and a third was new data. Looking at the effect of climate shocks on the financials of insurers by state. So I think, like to be, to really deliver for readers or viewers. I think this coverage has to either answer the question of “What have you found?” That’s new here, or “what are you doing to help sort of bring that knowledge down to a geography where it hasn’t been covered?” I think we’re at the point now where coverage of climate change and insurance kind of isn’t that new anymore.

And I think just noting that climate change is affecting the insurance market kind of no longer counts as interesting, or a new story that advances public knowledge. But luckily there’s, you know, so much news all the time, especially in states that are most affected. And again, this we threw, and Bloomberg, too, so much data out last year into the public realm. And I really do hope reporters take time to look at what that data shows in the regions that they’re serving as journalists.

Mark Hertsgaard: Thanks, Chris, and your New York Times piece the same piece I’m talking about after warning that look, this is a crisis that’s in the making. Your piece listed three things to watch for going forward to see how the crisis is going to evolve. Could you repeat those three things here along with again some advice on how our fellow journalists can turn those three sort of tenfold.

Christopher Flavelle: Gosh! I would love to, but I honestly, I don’t recall. I don’t remember. Do you want to tell me what they are, and I can, happy to.

Mark Hertsgaard: That’s very honest, so I will call up your piece, which everybody can see here in the chat, and I read it again last night, but I’m going to quickly scroll to the bottom, and here we go. Three things, I’m going to quote directly, our reporting points to three things to watch for next.

One: what will happen to home prices? Fewer prospective buyers means home values are likely to fall, but the pace of those changes is hard to predict. Two: how will state governments respond? Insurance is regulated by the states, but their interventions tend to revolve around giving concessions to insurers that stick around, making it easier to charge high premiums. Three: will insurance complicate Donald Trump’s plan to ignore climate change? Big question. The Treasury Department under President Biden laid the groundwork to gather data in this area.

But the incoming Trump administration, which obviously is now here, could be pressured to intervene, especially since some of the highest premium increases are in states that Trump carried in November. So those are the three. What will happen to home prices? How will state governments respond? And what about Trump’s denial?

Christopher Flavelle: And I stand by all those, those, all those, all aged well, in the last few weeks, the thing that I’d really know for reporters who may be listening is, as Leslie mentioned. I think every state has a state insurance commissioner or something akin to it. Some of them, like in Florida and California, get plenty of press calls. Many of them do not, right? So I’d like, for people who may be reporters, or even covering this stuff in states that aren’t those states, I think it’s really worthwhile to get in touch with your state insurance commissioner, and just say, “Hey, like, what are you seeing? What initiatives are underway to deal with it? You know, what’s the news I can break?” A lot of these offices, from my interaction with them, don’t seem to get many press calls, and I think, from a public interest point of view, it’s good that they are subject to more public scrutiny, and from the perspective of journalists looking to break news, often it’s the case that these offices are engaged in interesting and newsworthy initiatives to try to address the problems we’re talking about in this call.

And no one knows about it, because no one’s bothered to call and find out. I was in New Mexico for an insurance story two months ago, and they have a really interesting pilot project which I only mentioned in a single sentence in the story, trying to change, to reduce the risk level from wildfires in one county in New Mexico, and I thought, boy, I would love if I had time to go and write a whole story just on that one pilot project. But I didn’t. I hope someone does. And I bet most states would have something similar and and like, there just aren’t enough national reporters covering this to get to all those states. I really encourage people who are thinking, okay, what? What can I do on this broad topic in my state? Start by calling your insurance commissioner and just seeing what they’re doing to address these risks.

Mark Hertsgaard: Good advice. That’s from Christopher Flavelle of the New York Times. I’m going to turn quickly now to Anita Chabria. But first, Anita, let me just, with our overseas colleagues in mind, let me ask a quick follow up to Dave Jones. Both Leslie and Christopher have mentioned that reporters can go to the state insurance commissioners here in the United States. What about our colleagues who are in other parts of the world? Do those kinds of public agencies exist to your knowledge, Dave Jones? Do they exist in Europe, in Africa, in Asia, or are there other public agencies that reporters can start their journalism journey on this story on.

Dave Jones: Yes, just about every country has a national insurance regulator. It’s only in the United States, with our propensity for doing things dramatically different from everywhere else, that we regulate insurance at the state level.

But every country has an insurance regulator. Sometimes they’re combined with bank regulators, sometimes they’re alone, but they can be a terrific source of information. And as Chris pointed out, potential stories about what’s happening in that country.

There’s also an International Association of Insurance Supervisors, which is the global standard setting body for insurance regulation. And it’s published some important reports around the impacts on insurance globally related to climate change. You mentioned at the start, the Financial Stability Board, which is an entity of the G20 that was set up after the 2007, 2008 crisis to try to make sure that didn’t happen again. Well, they’ve been charged with looking at the impact of climate change on financial institutions globally. They’re a source. And then there are a number of other international bodies that have weighed into this as well. So there’s a tremendous amount of materials out there, potentially in context, out there globally, for stories.

Mark Hertsgaard: Thanks so much. Okay. Now we’re going to turn to Anita Chabria of the LA Times. Anita, you wrote a, I must say, a very affecting column for the Times about rebuilding after the Los Angeles fires, and you were urging that everyone, the homeowners, the government officials, the real estate and construction industries recognize that hasty and misguided policies could backfire, and in particular they could worsen inequality by pushing lower income people out of what is already quite a challenging housing market in Los Angeles area. Can you explain the general line of argument here and the kind of response you got to that column.

Anita Chabria: Absolutely. I think equity after disaster is such an undercovered story, and being California, we have our fair share of disasters. And so over time I’ve been able to look at communities that have tried to rebuild, and we seem to every single time do the exact same thing which is hashtag “strong” it.

“We’re going to go in. We’re going to fix it. We’re going to rebuild fast and better.” And all this kind of stuff, and the result of that is two things. One, people quickly find out they’re underinsured or don’t have insurance, and they’re not going to be part of the rebuilding, and they’re forced to sell to speculators or to wealthier people who can’t afford to rebuild, or two, the folks who can afford to do it are individuals who need to get their lives back on track, and so speed is their greatest focus. Right? All they want to do is get back in their home. Politicians don’t want to get in the way with that, there is absolutely nothing politically popular about saying, “Hey, let’s take a step back. Let’s slow down. Let’s maybe do this differently.”

The insurance companies so far have not exerted power to force people to do things differently. And so what you see over and over again in California are communities that rebuild in these ways that do not, that force out the low income. Folks turn property over increasingly to wealthy folks. Build back communities that are going to burn or be destroyed in some way again, that is not sustainable from the insurance perspective or from the human perspective. And so what I’m trying to do now is what I realize is that every single time we all know all this we all see it. We live it. The average homeowner has no idea they do not see the risk in rebuilding. And so I really feel that that’s a story that we have to help people to understand is, hey, you really can’t just get back on your feet as fast as possible, because you’re just setting yourself up for tragedy in the future.

Mark Hertsgaard: That’s such an important point about the civic role of journalism, Anita, let me follow up on that California governor Gavin Newsom has said both that. Yes, we’re going to rebuild as quickly as possible, but also that we are going to be mindful of equity. We’re going to be mindful of long-term sustainability.

From your previous comment those would seem to be somewhat in conflict. The two goals that the governor has stated. Have you been able to do any further reporting on this, and just observing, you know, from your perch there in California. How do you think that’s playing out? And what can journalists do to shine a light on it?

Anita Chabria: I think California, the governor and the legislature have learned this equity lesson. They see it. But again, it’s a very politically unpopular thing. I think the governor and the legislature have done some quick things based on their learning, on other tragedies. For instance, they’ve put sort of a moratorium on speculators trying to buy those properties for a while and things like that. So they’re kind of doing the right things. But it’s that long run. Are we just going to let the Palisades in particular, was an area that everyone who studies this knew was at very, very, very high risk. You saw State Farm pull out of a bunch of policies about 6 months ago.

This is a high risk place to live, and what I’m really keeping an eye on is, what do insurers demand? Because I think insurers have a responsibility and a power here they could simply say, “Hey, California, hey, Palisades, you have to do A, B and C, as you rebuild, if you want us to insure.” I think that they sort of have a duty to do that rather than step back and not use their power to make change, and I think that the politicians have a duty to stick with that, and not just take the fast road and help people rebuild. That’s what I’ll be keeping an eye on.

Mark Hertsgaard: That’s Anita Chabria, of the Los Angeles Times. Do read her column. It’s there in the chat. It will both inform you, and I think, inspire you to be doing that civic role of journalism to help the population, and also the policymakers. To understand that we really need to be thinking about this stuff differently.

So we’re going to be shifting now into the second half of the hour. We’re a little late there, but we’ll get as many questions in as possible. But to do that first, I want to show you just one more 30 second clip of some of the issues that you can be reporting on on the climate and insurance nexus. Have a look.

Jeff Goodell: You know, when we talk about climate change, often we talk about green energy and clean energy, and reducing CO2 emissions, which is really important, but an equally important part, or perhaps even more important part of that is the adaptation side building cities that are more resilient.

One of the reasons that there was a shortage of water from these fires is because power went out in some of the water pumps because of the fire. You know, there’s a whole bunch of ways that we need to rethink how we build our cities and how we live our lives, because the sort of blunt truth of it is that we have built our world for a climate that no longer exists.

Mark Hertsgaard: That’s Covering Climate Now’s good friend and colleague, Jeff Goodell, who is an author and a journalist, often writes for the New York Times magazine, and also for Rolling Stone, a national correspondent. Check out his book The Fire Will Kill You First, Jeff’s comments there about how we rebuild going forward. And we’re in a world that is not built for the emerging climate that opens a whole area of coverage that all of us as journalists need to be exploring, going forward.

Okay. So now we’re going to switch to some questions. And again, you can keep them coming. We’ll get to as many of them as possible. And again, please do list not just your name, but the name of your outlet, and I’m going to start with a question from a colleague of ours in India from Down To Earth magazine, and pardon me if I mispronounce your name, but I think it’s Akshit Sangomla, who asks, quote, “Are the risk assessment models used by insurance companies in keeping with the rapid changes happening in climate and their impacts, or what more needs to be done in this regard?” Dave Jones, I think that’s a question for you.

Dave Jones: The answer is yes and no. So the catastrophe models used by insurers and reinsurers are increasingly sophisticated and increasingly used by the insurers to try to identify where catastrophic risks might land, driven by climate change. There is room for improvement, to bring more of the latest climate science into those models to make them better. But I think it’s important to note we’re not going to model our way out of this problem. In fact, better modeling just gives us more bad news about where the worst risks are landing, and causes insurers to, as was alluded to by one of the panelists, cherry pick even more risks and shove more people onto FAIR plans.

Then there are the models that are used at the home by home business, by business level, which in this country are called risk score models, and those models are good enough to tell the insurers from their perspective. They don’t want to write the home or business, but do not account for landscape scale, community scale or even property scale mitigation. The models are technically able to account for this, but in jurisdictions throughout the United States. They’re not required to have the models account for this on the underwriting side, and as a consequence, people will invest in home hardening, defensible space. They’ll be in a firewise community.

They’ll pay through their federal, state and local taxes for landscape scale forest treatment in the wildfire context or other mitigations, and they get no credit for it in the model, and that will only change. That’s something insurance commissioners can change because they control rating in the US. To the extent they do, they don’t control underwriting that will require a state legislative change, because only state legislatures in the US have authority over underwriting. In other jurisdictions, the insurance regulator does have the authority to require the models to incorporate mitigation, and I don’t know specifically in India what they’re doing, but there is regulatory authority in other jurisdictions, to require mitigation to be accounted for.

Mark Hertsgaard: Thanks. Here’s a question from a colleague of ours in New Orleans at the really excellent digital site, The Lens. This is from Delaney Dreyfoos, who asks, this is for you, Chris Flavelle, “Why is data missing from Texas, regarding how many policies have been canceled due to nonpayment through 2022?” Why is data missing from Texas?

Christopher Flavelle: Yeah, the question refers to a story we ran. I think it was last week. Pretty sure it was last week we got early access to Department of Treasury data which showed, among other things, people dropping insurance, the data collection was done by insurance companies in collaboration with state commissioners in collaboration with the National Association of Insurance Commissioners. The explanation we got from Treasury was that not all states adhered to and complied with the data collection requirements equally and for Texas, for whatever reason, not all of the fields of data requested by NAIC and Treasury were filled in.

So Texas, and I think we discussed this briefly in the methodology to that story, Texas had had some extra holes in the data that wasn’t true for other states. Why that’s the case, I don’t know.

Mark Hertsgaard: Now a question from a colleague at the Miami Herald, another Covering Climate Now partner, from Denise Hruby, who asks, “Could you speak more about the relationship between insurance companies and reinsurance companies? I often hear that insurance companies aren’t going to pull out or drop policies as long as they get reinsurance.” Leslie Kaufman, you mentioned reinsurance companies. What’s your take on that? And maybe, Dave Jones, you might want to chime in as well.

Leslie Kaufman: Yeah. So insurance companies have a lot of ways to cover risk. One, they take in premiums and they invest that. But they also buy reinsurance. Now they buy different amounts of reinsurance. Reinsurance is not regulated the same way. Insurance is regulated often in places like Munich Re. Which Dave mentioned, or Swiss Re, are not United States companies, and so they do not have to follow the state by state regulations. So they’ve been raising prices pretty heftily now, different insurance companies rely on reinsurance, different amounts. We’re particularly worried when we see an insurance company that has a very high rate of reinsurance. We have written about those. That means we think that they are not properly, properly capitalized, but the long and short of it is one of the reasons that insurance prices are going up in the United States is that reinsurers who are offshore have looked around and said, “There’s a pretty high climate risk that is not being accounted for.” I did an interview last year with the chairman of Swiss Re. And he basically said to me, “We’re going to keep on raising rates. We don’t think rates in the United States are realistic, and we’re going to raise reinsurance, so that we want to see more payments.”

And the other thing they’ve done, and this is important, they’ve raised deductibles. So if you look at severe convective storms which didn’t used to be an issue, but which in recent years have caused a great amount of insurance damage. They’ve raised their deductible essentially to the insurance companies on how much they’ll cover of that they’ve said, we don’t want those small events. We just want the big events. So I think reinsurance is a very important part of this story.

Mark Hertsgaard: That suggests another follow up story for reporters everywhere, especially here in the United States. Will those reinsurance companies in Europe look at Donald Trump’s incoming administration and his promise to “drill baby drill” and essentially make climate change worse? Is that going to lead those companies to say, “Oh, climate risks are going to be higher yet in the United States,” and perhaps raise their rates again? So interesting idea to look into. And here’s another question that speaks to follow up stories that would be done, I think, especially at the local level, and it comes from Al Ortiz of CBS News, who asks, “What can individuals do to improve their insurability, for example, in their construction and reconstruction policies by different materials, landscape planning, location, selection, etc.?” Who wants to jump on that? Dave, perhaps.

Dave Jones: So there is a body of empirically based approaches to increase the survivability of her home from different perils. It’s referred to as home hardening and in the wildfire context, also defensible space. And the insurance industry’s own research institute has done a lot of empirical work on this. And happily, so depending on your state, depending upon the nature of the peril that’s hitting you, whether it’s hurricane, wind, flood, wildfire, severe convective storm. There are things you can do, and you can get advice from building officials with regard to these things, that you can do to make your homes more survivable. Now they’re not a guarantee the home’s going to survive. But in the wake of the Paradise Campfire, for example, if the home had been hardened and had defensible space, it had a 50% higher chance of surviving than those that did not.

The problem, as I alluded to earlier, is that in the United States, the risk score models used by the insurers to decide whether to renew or write. Your insurance are not required to and do not account for those mitigation efforts. So it’s extremely frustrating for people. So one potential story for those of you in the states who are in different geographies, where climate change is landing is to talk to people that have actually spent money to do home hardening or talk to the hoa that’s done mitigation or talk to the local government or the state government that’s actually doing mitigation. And then ask the insurance companies, hey, based on this, are you writing insurance or not? I mean, that is a big problem in the United States, and it’s not just limited to Florida, Louisiana, California, the West. It’s really in all the states that the reporters on this call have identified where this impact is landing.

Mark Hertsgaard: Anita Chabria of the LA Times, can I get a quick comment from you on this as well? You’ve been out talking to people who are on the ground there in Los Angeles, who are understandably eager to rebuild. How do you think they would react to the idea of using different materials, more sustainable and resilient materials, and B, whether that would get them any sort of break on their insurance?

Anita Chabria: Well, I think Dave has hit it right on the head, is there’s almost a penalty for building fire. Wise, right? You’re putting your own money in, with nothing to get back from it. So I think you’ll see really rich people build really fire resistant homes, and that’s great. And those are the people who actually don’t even need insurance, because if their house burns down they’ll move into their second home. But for people who aren’t even getting enough money to rebuild in any fashion, they can’t harden, right? There’s no incentive. Those are expensive materials. They’re hard to get construction. Crews are not familiar with them. You need a specialized crew who knows how to work with them. You need an architect who knows how to build firewise. You need a gardener who knows how to landscape properly, and really follows the rules. It’s just an incredible extra expense to build firewise with absolutely no payback from insurance companies or the state.

Mark Hertsgaard: Okay. Now, a question from Stephanie Sierra at ABC News, another partner of Covering Climate Now. And I think this is for Dave Jones. Stephanie says California’s insurance commissioner, current commissioner Ricardo Lara has said that his new Reform Plan will require insurance companies to increase writing policies by 85% in areas prone to wildfire. But the text of his regulation allows for insurers to only increase those policies by 5% or more over the course of two years, which leads some critics to argue he’s being too lenient on the insurance companies. What do you think?

Dave Jones: So because insurance commissioners have no authority over underwriting, that is the decision, whether to write or a new insurance. What my successor did was try to leverage giving the insurers everything they asked for on the rating side, to get them to agree to write a little bit more in the high wildfire risk areas. And so it’s a condition, it’s not a requirement. So if they want to be able to use probabilistic models for the catastrophe load of the rate. If they want to include reinsurance costs in the rate, then they have to write a little bit more in the wildland urban interface for the high wildfire risk areas. There are essentially two ways they could do this. One is write in the high wildfire risk areas, a share of the market commensurate to 85% of their market share outside, or alternatively, just do a 5% increase. So if you’re hardly writing anything, you might select door number two, which is just a 5% increase which isn’t going to get you much. So Consumer Watchdog, the leading consumer advocacy organization in this space, has complained that this is not going to result in much more insurance being written, and then ultimately the insurance can come back in two years and say we couldn’t do it and be relieved of the obligation entirely. So there’s a big debate about this.

The final point I’ll make, though, is that the LA wildfires were not a question of if, they were a question of when, and the insurers, at the time that they asked for all these changes in California, knew based on their models that either there was going to be a terrible tragedy in La or somewhere else in the state. And nonetheless, they said, “Look, if California gives us all these regulatory changes, we’ll start writing new insurance again, and we’ll start writing a little bit in the wildland urban interface, right?” I don’t believe the LA fire should be used as a pretext for them to renege on that commitment, but they might. And so that’s, you know, a story to pay attention to and not just in California. But this has potential implications for insurance availability elsewhere. As they look for ways to try to recoup their losses. They’re not supposed to do that across states, but wait for it.

Mark Hertsgaard: Again a great opportunity for accountability reporting on the part of us as journalists. Let me go now to a question from Alaska, and this comes from Yereth Rosen. Yereth is a longtime public radio reporter there, and is now with the Alaska Beacon, longtime friend of Covering Climate Now. She asks, “Is landslide related insurance available anywhere? There is a bill pending in the Alaska Legislature that would create a quote Alaska flood authority with insurance that would include landslides. And Alaska has had multiple fatal landslides in recent years,” she adds. So how does that compare to other jurisdictions? I’m guessing that’s another question for you, Dave.

Dave Jones: So insurers excluded flood coverage about 50 or 60 years ago in this country. And that’s why the National Flood Insurance Program was stood up to provide flood coverage. Insurers have tried to argue that the exclusion and all of their homeowners and condo owners and renters policies for flood coverage also covers landslides.

Now in my state, I dealt with this after the wildfires in Ventura and Santa Barbara County, and specifically Montecito, the thing that killed people and destroyed homes in Montecito, the fire was bad enough, but it was the landslide following the fire. In California we have a legal doctrine called the Proximate Cause Doctrine which basically says, “Look, if a covered peril in the insurance policy causes another peril to destroy the home, then the insurer has to pay.”

So I gathered a bunch of evidence from geologists and other experts, and we saw that the fire scarred the landscape, allowed the hill to come down, destroyed the homes, and I ordered the insurers to pay, even though they were arguing that the flood exclusion was sufficient for them not to cover landslide. So it’s going to be a case by case, state by state thing, and it’s certainly an interesting area to inquire in.

Our friends, family, and loved ones in LA are also going to be contending with this peril in the wake of these catastrophic wildfires, because there’s every risk that when it does hopefully begin to rain again in LA, that some hillsides are going to come down, and that’s going to raise a whole other challenge with the insurers in terms of whether they’re willing to cover it. We have precedent forcing them to do it. I anticipate they won’t argue with it, but they might.

Mark Hertsgaard: Rapidly coming to the end of the hour, and we try always to close on time here at Covering Climate Now. So I think, with just one last question, and this comes from Brooke Stephenson in Colorado, at the Boulder Reporting Lab. Something that will be of interest, I’m sure, to local reporters all across the country and around the world, quote, other than higher rent. What effects will the loss of insurance coverage have on renters that we should be watching at the local level? I’m guessing, I’m sorry, Dave, I keep turning to you on all of this, but I think these are questions for-

Dave Jones: I think any of the panelists could answer this. I mean, I think, when a catastrophic climate-driven event occurs, it impacts not just homeowners, but it also impacts multifamily housing, in which there are renters. Many renters don’t have insurance, and they lose everything, and FEMA at best might provide you with five, 10, 15, 20,000 dollars, maybe 30,000 for homeowners, not so much for renters. And the same problem with climate change-driven catastrophic events is also causing insurers to jack up prices for renters, insurance, and increase deductibles. All the phenomena that the other journalists have reported. So climate change is driving us towards an uninsurable future, not just for home insurance, not just for business insurance, but for renters insurance, too, that has all sorts of distributional equity consequences, because a disproportionate share of people renting are low income. A disproportionate share of them are people of color, and so they really are the biggest losers. When these disasters occur, because they typically don’t have insurance and really very, very little to fall back on, to try to recover.

Mark Hertsgaard: That’s Dave Jones. He was the former Insurance Commissioner for the state of California. Read his piece in the New York Times today, urging that fossil fuel companies be compelled to pay for these damages, to at least cover some of the costs of the damages in Los Angeles and elsewhere, and sadly. We, as journalists, are going to have a lot of news pegs for this story going forward. We know from the science that as greenhouse gas emissions continue to concentrate in the atmosphere that the extreme weather events are only going to become more and more frequent and more and more severe. So sadly, lots of news pegs ahead, but an opportunity for us to fulfill our civic responsibilities here, to really bring people up to speed on what’s happening and why and what they can do about it.

So I want to thank Dave Jones, and also our terrific colleagues. On this call Anita of the Los Angeles Times. Christopher Flavelle, of the New York Times, and Leslie Kaufman, of Bloomberg News, Bloomberg Green News. I should say. We thank all of you for being here. There will be a full transcript. And the video of this session that is sent to everyone who is RSVPed. And then we’re also going to ask you, if you can, to complete a short survey that you’ll see linked to in the chat there, so that we at Covering Climate Now can continue to bring you our fellow journalists the kind of webinars that really are both practical and inspiring and informative about the kind of reporting that we all need to be doing on this defining story of our time.

And with that I will thank everyone for being here today, and on behalf of everyone here at Covering Climate Now, I’m Mark Hertsgaard, wishing you a very pleasant day.