The frequency and severity of natural disasters are on the rise, resulting in significant economic losses worldwide. In 2024, these losses reached an average of $368 billion, with insurers covering about 40%, which leaves a large part uninsured. As a result, insurers are pulling back coverage in high-risk areas, including certain regions of California and Louisiana. Governments, facing the challenge of managing the financial impact of catastrophic events without imposing politically unpopular tax increases, are looking into collaborative solutions like Britain's Flood Re and Switzerland's pooled risk model. However, these approaches have their drawbacks, often necessitating extra funding after disasters, with insurers likely shouldering a substantial share of the costs linked to climate-related damages.
https://www.reuters.com/breakingviews/insurers-will-struggle-dodge-climate-change-tab-2025-02-26/
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The frequency and severity of natural disasters are increasing, causing significant global economic losses. Insurers covered around 40% of these losses, leaving many uninsured. As a result, insurers are reducing coverage in high-risk areas like parts of California and Louisiana. Governments are exploring collaborative solutions, such as Britain's Flood Re and Switzerland's pooled risk model, to manage the financial burden without raising taxes. However, these models often require additional funding post-disasters, with insurers likely bearing a large share of climate-related costs. Therefore, governments and insurers must find sustainable ways to address the growing financial risks of natural disasters. While collaborative solutions offer some promise, they may not be enough to fully cover the increasing costs of climate-related damages.
If insurance is pulling away from these areas, how will this affect living costs? Surely people will want to leave if they can and the people who are able to leave will most likely leave a gap in income/skills supply in those areas. I wonder how this will affect these areas?
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