When insurers can no longer afford the risk

In 2023, two major insurers joined a growing list of companies that will no longer offer new home insurance policies in California. In Florida, the situation is worse, with more than a dozen large home insurance companies retreating from the state. Both states have seen devastating property losses due to extreme forest fires and hurricanes - risks that are only increasing due to the changing climate.

But why can’t the insurance companies simply adjust premiums to reflect the changing risk that climate change is bringing, rather than leaving a market entirely? Because like many economic models, insurance risk is assessed based on historical data (in some cases, by law), which is not particularly reflective of future (or even present) risk. 

Dr. Spencer Glendon, Founder of Probable Futures and former Head of Research at the investment firm Wellington Management, returns to Climate Now to examine how much our historical experiences can be used to inform how we should respond to our rapidly changing world, and how the roles of quantitative data, empirical analysis, and storytelling may need to shift for us to make the most of our collective wisdom in preparing for challenges of the future.

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