

Who Should Bear the Cost? Socialized versus Market-Based Risk Management
Jan 22, 2025
Natural disasters are wreaking havoc, leaving many uninsured. The podcast dives into the clash between socialized risk management and market-based insurance. It highlights California's struggles with home insurance regulations and how they impact premiums. The discussion also reveals the growing consequences of climate change, driving up disaster severity. As costs soar, the balance between affordability and accountability in insurance becomes increasingly complex. Who really bears the financial burden? This episode explores that pressing question.
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Rising Uninsured Losses
- Natural disaster losses are increasing, with a large portion uninsured.
- Non-peak perils like floods and wildfires are becoming more frequent and severe due to climate change.
Insurance Loss Ratios
- Insurance companies assess risk and set premiums for a 70% loss ratio.
- However, California's loss ratio has been 108% over the last decade due to increasing wildfire losses.
California's Insurance Market
- Proposition 103 in California restricted insurers from including reinsurance costs in premiums.
- This, combined with rising reinsurance costs, has led some insurers to stop selling new policies.