[rufus_foreman]

>> My understanding is fires are getting worse on the west coast thanks to climate change

So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets?

There's a price that would make it work. Risks are higher, price of an insurance policy would be higher.

Insurance companies, left to their own devices, wouldn't leave markets due to that, insurance companies would price risks accordingly, which is the thing that insurance companies do. That's the positive externality of insurance companies, they give you information about risk.

Insurance companies leave markets when they aren't allowed to accurately price risk, which the state of California will not allow them to do.

[DoreenMichele]

So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets?

I'm not arguing with you nor rebutting your claim. I haven't studied the situation in California and have no opinion about what is going on there.

But I did work in insurance for a few years and insurance began as a form of betting or gambling. If the possibility of X happening is too high, it's no longer a gamble.

So as the odds of being required to payout approaches 100 percent, they stop covering it because that's not what they do.

This is why flood insurance in the US is provided by the federal government, not private insurers: Because most land with residential development floods. It's not a question of if but when, how often and how badly.

Hurricane Andrew also significantly impacted the homeowners insurance industry. I don't recall the details at the moment, but this is not without precedent.

[infecto]

I don't think your example is completely logical and is pretty biased sounding opinion from "someone who did work in insurance".

"Because most land with residential development floods" - no i don't think its exactly that. Most land with residential development floods is not true. Now what is true is that most land in a flood zone does indeed have a high chance of flooding. Flood zones are a fairly known and accurate data set that anyone can look at. Heck most of the online realtor sites will show you a flood map with the property. This is the same problem for individuals that live in CA in known fire zones. These type of properties are impossible to underwrite because everyone in pool is high risk. You either need to build a home that is fireproof or accept the risk and potential for total loss. The fed's flood insurance and the state levels fire program are just allowing people to continue to live in unsustainable areas or with properties that have not taken the precautions to prevent loss.

[rufus_foreman]

>> Because most land with residential development floods

Every year?

Not every year. It's a math problem. Insurance will cover it if they are free to set the premiums.

[DoreenMichele]

It tends to be something the market won't bear though. If people can't afford it, pricing it as high as you want tends to cause the market to collapse anyway, just from a different mechanism.

Some things simply don't work well when handled as a business model.

Fire departments that only show up for people paying their fire dues don't work at all. In practice, places that require you to pay for fire department help have the fire department show up anyway and they watch your house burn down while standing around to be on hand just in case it threatens to spread beyond the uncovered property.

Places where there is no police department and rich people all hire private security are also pretty dysfunctional socially.

Some things get provided as a public good by sane societies because other formats for addressing it simply don't work.

[infecto]

Some things simply don't work as a government model either. The logic in this entire thread is flawed. Just because someone decided to buy a home in a known flood zone or in a known high-risk fire zone, does not mean other individuals should have to compensate them for taking on that risk. Lets not dilute this with public services such a police or fire. This is about insuring homes that individuals bought, often/majority of the time with known data that it is at some risk. We cannot just eliminate risk for risk-takers.

[DoreenMichele]

I spent some years trying to find someplace on earth I could theoretically move that had no natural disasters. It doesn't exist.

It's a case of pick your poison: Which kind of natural disaster are you more comfortable with? Tornados? Fires? Hurricanes? Landslides?

Flooding is the most common natural disaster humans face. We tend to build our biggest cities at natural port sites.

We need water to drink, for hygiene and for crop production and we use waterways as cheap transit for goods. So we tend to build in flood zones.

We could probably do a better job of favoring architecture that played nice with that, such as having carports at ground level under the house and residential development above that. But the reality is humans can't escape our inconvenient need for water.

Housing is a public good. One criticism cited frequently on HN of the US housing situation is that it has created problems socially to treat homes as investment vehicles. It gets cited as a root cause of the national housing crisis.

I don't know how to have a meaningful discussion of any of this by following the arbitrary rules you list. It makes no sense to me.

[infecto]

What arbitrary rules? I am simply saying that it is impossible to underwrite for anyone, including the government, buildings that are built in known high risk zones.

Just because a city is near a port does not mean that exact spot of land is a flood zone. Just because you live in a fire prone region does not mean your house cannot be covered. There are a lot of ways to retrofit homes for fire prone areas including landscaping changes.

You’re entirely correct that there are threats to buildings everywhere. My point is that most state/government programs treat areas that are impossible to underwrite. I am suggesting that in those cases perhaps it’s more cost effective to not underwrite the risk. You could shape it different ways, from not underwriting it at all to underwriting the risk but on a loss, paying for the relocation not rebuild.

This has nothing to do with being a public good and more that zones that are known complete loss high risk zones should be mitigated. Yes nature exists everywhere but you can generally underwrite things when your entire pool is not experiencing a total loss.

Is suggesting a home built in a flood zone should not be rebuilt arbitrary? Is suggesting homeowners in high risk fire zones take the steps to alter their landscaping to reduce risk arbitrary? You are sharing all these feel good sentiments and I am simply saying it’s not feasible to underwrite these activities.