Insurance companies do not need to hold a position on climate policy. They need to price risk correctly or lose money, and they have been repricing.
What is happening
Premiums rising sharply in areas exposed to flood, wildfire and storm. Coverage withdrawn entirely from some regions. Deductibles raised to levels that make claims for moderate damage pointless.
Reinsurers – the companies that insure insurers – have raised their prices, which flows through to everyone.
Why it is a leading indicator
Insurers have the data. They see claims across entire regions over decades and employ people whose job is to model how loss frequency is changing.
Their pricing reflects what they expect to pay, not what anyone would prefer to be true. Where premiums move sharply, the actuaries have concluded something.
The consequences for property
Uninsurable property is difficult to mortgage, because lenders require cover. Property that cannot be mortgaged is difficult to sell.
That mechanism can reduce the value of a property to almost nothing without any physical damage occurring. It is the transmission channel by which climate risk reaches household wealth, and it is faster than most people expect.
The policy response so far
State-backed insurers of last resort in several jurisdictions, providing cover where the private market has withdrawn.
That maintains market function and transfers the risk to taxpayers, which is a decision that has been made largely without being discussed.
What an individual can do
Check insurability before buying, not after. Availability and price of cover is a more honest assessment of a location’s risk than any brochure, and it is publicly obtainable.