Why climate disasters and home insurance don’t mix

Presented by Enbridge: Your guide to the political forces shaping the energy transformation

Mar 18, 2024 View in browser   By Arianna Skibell Presented by Dark smoke fills the sky as the Camp Fire rages through Paradise, California, on Nov. 8, 2018. | Noah Berger/AP California is one major wildfire away from an insurance meltdown — and residents could be forced to foot the multibillion-dollar bill. That’s according to Victoria Roach, the president of California’s state-chartered insurer of last resort, which — like many state insurers in disaster-prone regions — is grappling with the effects of climate change on the private insurance industry, writes Thomas Frank. Across the country, property insurers are retreating from vulnerable areas that have become too risky to insure. Hurricanes in Louisiana and coastal Texas chased away a number of insurance companies between 2020 and 2022, while Florida’s insurance market never recovered from 1992’s Hurricane Andrew. And State Farm, California’s largest property insurer, made national news last year when it said it would no longer write new policies in the state. That has forced hundreds of thousands of people to buy coverage from state insurers of last resort, many of which are not financially prepared for the influx of new customers. “As those numbers climb, our financial stability becomes more in question,” Roach of California FAIR Plan said. If the state were to experience a wildfire as damaging as the 2018 Camp Fire, which killed 85 people and engulfed 18,000 buildings, the state-chartered insurance company could face $6 billion in claims, Roach said. And once the insurer drains its coffers, it would have to recoup as much as $3.3 billion from policyholders. “It’s a ticking time bomb,” said Michael D’Arelli of the American Agents Alliance, an association for insurance agents. Part of the problem is that many state-chartered insurers are unwilling or unable to set rates that accurately account for climate risks. In California, for example, state law restricts insurance premium cost increases. Roach said FAIR needed to raise premiums by 70 percent in 2021 — but only got approval for a 16 percent increase. A new proposal would ease a restriction that bars insurers from using projections of future damage and climate conditions to set premiums. But whether policyholders are charged more upfront or slapped with a surcharge after a disaster, one thing is clear: It is becoming increasingly expensive to live in areas vulnerable to climate change.   It's Monday — thank you for tuning in to POLITICO's Power Switch. I'm your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to askibell@eenews.net. And folks, let's keep it classy.   On the ground in Albany. Get critical policy news and analysis inside New York State. Track how power brokers are driving change across legislation and budget and impacting lobbying efforts. Learn more.     Listen to today’s POLITICO Energy podcast Today in POLITICO Energy’s podcast: Ben Lefebvre speaks with Daniel Yergin, CERAWeek by S&P Global co-chair and Pulitzer Prize-winning author, about the biggest energy themes, stories and questions heading into this year’s conference.   JOIN US ON 3/21 FOR A TALK ON FINANCIAL LITERACY: Americans from all communities should be able to save, build wealth, and escape generational poverty, but doing so requires financial literacy. How can government and industry ensure access to digital financial tools to help all Americans achieve this? Join POLITICO on March 21 as we explore how Congress, regulators, financial institutions and nonprofits are working to improve financial literacy education for all. REGISTER HERE.     Power Centers House Speaker Mike Johnson (R-La.) and Majority Leader Steve Scalise (R-La.) during last week's House GOP retreat in West Virginia. | Alex Wong/Getty Images GOP lawmakers have big 'energy week' plans House Republicans plan to take up six energy-related bills and resolutions that would undermine President Joe Biden's energy agenda, write Kelsey Brugger and Miranda Willson. The Republican-termed "energy week" features efforts to repeal the greenhouse gas reduction fund, make it easier to build energy projects in wetlands and curb legal challenges from environmental groups, among other initiatives. Pipeline expansion under scrutiny Judges of the U.S. Court of Appeals for the District of Columbia Circuit are weighing a case that pits a natural gas pipeline expansion against New Jersey's climate goals, writes Niina H. Farah. The nation's top energy regulator approved the $1 billion gas expansion project to serve about 3 million customers in New Jersey and other Eastern states. But advocacy groups argue the project would contribute about 50 percent of the state’s emissions by 2050 — the same year New Jersey plans to switch to 100 percent clean energy.   A message from Enbridge: Can we grow our economy and reduce emissions? It’s proven we can. The key? Natural gas. Last year, US GHG emissions dropped 2% year-over-year driven by switching from coal to natural gas in power generation. Significantly, the emissions drop occurred at the same time US GDP increased by 2.6%. Read more about the role of natural gas to reduce global emissions.   In Other News Impacts: African cocoa plants are running out of beans as the global chocolate crisis deepens. Pony up: Why Americans pay so much more than anyone else for weather disasters.   A message from Enbridge:   Subscriber Zone A showcase of some of our best subscriber content. A whitlow-wort plant is pictured in Austin, Texas. | Joseph A. Marcus/Lady Bird Johnson Wildflower Center/Wildflower Center Digital Library The escalating conflict between producing clean energy and protecting vulnerable species has a new case study: a modest Texas plant called the bushy whitlow-wort. Twenty-four Republican attorneys general are challenging the Biden administration’s new rule to limit methane emissions from the oil and gas sector. The U.S. could increase production of geothermal energy by 90 gigawatts or more by 2050 — 20 times current capacity, according to an Energy Department report. That's it for today, folks! Thanks for reading.   A message from Enbridge: The energy industry continues to reduce emissions from natural gas. At Enbridge, we know the value of using all the tools in the toolbox to meet this objective. Here are a few examples. We were the first utility in North America to blend hydrogen into natural gas, lowering its carbon content. We’re investing up to $1 billion in facilities that will turn food waste into carbon negative renewable natural gas. And, we’re piloting technologies and equipment to avoid venting methane throughout our system. Enbridge is also investing in carbon capture and storage sites across North America with phased in-service dates expected in late 2026. We believe the onus is on industry to reduce emissions. And with the innovation and work underway, natural gas will remain a key part of our clean energy future. Read more.     Follow us on Twitter Arianna Skibell @ariannaskibell   Follow us

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