The raging Palisades Fire and Eaton Fire have brought home a specific problem: can the insurance system remain in place if the risks are so high? This question, nonetheless, is not limited to California or to the US.
Climate change has been blamed for exacerbating natural disasters. The insurance industry has rated the climate crisis as the biggest threat to its future 4 years in a string. Does it mean the reality of global heating because of fossil fuels should no longer be challenged?
Part of the problem is that the insurance system has traditionally used past disasters as a guide to future risk. But that model no longer addresses the cause, and it is not easy to build another one. Preparing reliable local projections, especially if different risks intersect, is hard.
If the insurance industry in a country fails, the millions of people relying on it are going to face a huge crisis. But there are more challenges, too, such as if insurance becomes unaffordable, property values collapse. Is a 2008-style financial crisis imminent?
