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POLITICO Energy
Why the LA fires could break California’s insurance market
Jan 10, 2025
Camille von Kaenel, a California environmental reporter for POLITICO, discusses the dire state of California's insurance market, exacerbated by ongoing LA wildfires. She explains how the fires may push the already fragile market to the brink of collapse, with private insurers withdrawing from high-risk areas. The conversation also touches on the challenges faced by homeowners due to increasing costs and the state's last-resort insurer, along with potential regulatory changes aimed at stabilizing property insurance in affected regions.
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Quick takeaways
- California's fire insurance market is at a critical point, with potential collapse threatening homeowners already facing skyrocketing rebuilding costs.
- New regulations by California's insurance commissioner aim to stabilize the market amid rising wildfire risks, but effectiveness remains uncertain in retaining insurers.
Deep dives
Collapse of Fire Insurance Market
California's fire insurance market is currently facing a significant crisis, with private insurers withdrawing from the state due to escalating risks from wildfires. The state's insurer of last resort, tasked with covering those unable to find other insurance, is under immense financial strain as its total exposure has tripled since 2020. Recent wildfires in the Los Angeles area, which are estimated to generate tens of billions in damages, could further accelerate this impending collapse, forcing many homeowners to bear increased out-of-pocket rebuilding costs. This situation highlights a national trend in which insurers are reevaluating risks related to extreme weather and climate change.
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