Insurance, Climate Risk, and Stranded Assets
How climate change is making regions uninsurable, repricing financial risk, and threatening to strand trillions in fossil fuel investments.
Toward an Uninsurable World
Insurance is the canary in the coal mine of climate change. Insurers price risk based on data, and the data is increasingly alarming. Global insured losses from natural catastrophes exceeded $100 billion annually in 2022 and 2023, roughly double the average of a decade earlier. The industry's models, built on historical weather patterns, are breaking down as climate change makes extreme events more frequent and severe.
The consequences are concrete. State Farm and Allstate stopped writing new homeowner policies in California after wildfire losses became unmanageable. Insurers are withdrawing from Florida's hurricane-exposed coast. In Australia, premiums in flood-prone areas have risen 50-100%, making insurance unaffordable. If private insurance retreats, governments face an impossible choice: subsidize insurance (enabling continued development in dangerous areas), create public backstops (transferring risk to taxpayers), or let property values collapse.
