The Role of the Insurance Industry in Climate Risk

The insurance industry serves as a vital barometer for climate risk, as its core business model revolves around accurately pricing risk. Recent reports highlight alarming trends, particularly in states facing climate stress, where home insurance rates are surging, and companies are withdrawing their services altogether. This shift reveals a growing disconnect, where the rising risks associated with climate change far outpace the increases in insurance premiums, creating a 'climate bubble.' This scenario poses a dire warning for homeowners, as many are either unable to afford insurance, facing bankruptcy, or defaulting on their mortgages.