[metabagel]

This strikes me as not understanding the limits of private insurance. There wouldn’t be earthquake insurance across much of California if the state didn’t provide it. Private insurance isn’t generally able to withstand large calamities which result in many thousands of high dollar claims in a short period of time.

[tptacek]

You can insure against a very expensive event that is very likely to happen; it's simply that the premiums for that insurance will be very, very high. If you're "insured" for a catastrophic event that is likely --- for instance, a home in Pacific Palisades of any sort --- and your premiums look reasonable and bearable, then the odds are you're not insured, you're subsidized.

[metabagel]

This is a distinction without a difference (no insurance vs. unaffordable insurance).

[michaeljx]

Private insurance can and generally withstands large calamities (known as natcat losses) without government intervention via the utilisation of global reinsurance organizations. Especially for earthquake, a properly reinsured insurance can cover a large earthquake loss about once every 15-20years

[sangnoir]

Re-insurers also re-calibrate their rates, which may mean private may be effective ... until the first big disaster whereafter the re/insurance premiums become eye-watering.

[reshlo]

> There wouldn’t be earthquake insurance across much of California if the state didn’t provide it.

That’s fine. If it’s not possible to buy insurance for a particular house at a price that you can afford, don’t live in that house. The state’s other taxpayers shouldn’t be assuming your financial risk.

[bruce511]

True, but it's not quite as simple as that.

Say the city has invested in infrastructure, has a thriving industry etc. That typically isn't "portable". To get a return on that investment they need residents.

The residents naturally want things like insurance etc. It's high though - a barrier to entry. The city runs the numbers and decides that a resident is a net win even after insurance subsidies are applied.

Now granted, the calculation isn't that simple, and usually these things come with much hand-waving. But its not as simple as "other tax payers assuming the risk".

[sgarland]

Generally, high-density building produces more net income for a municipality. Especially couple with California’s Prop. 13 means that there is a LOT of high-dollar real estate that’s not contributing equitably to the state’s budget.

[reshlo]

How would it be profitable for the government to provide insurance if it’s not profitable for a private insurer? My impression is that private insurance premiums are a lot higher than the portion of local taxes that could be allocated to insuring homes.

It seems like sunk cost fallacy is at play here. When is it time to stop throwing good money after bad, and start thinking about a managed retreat?

[sokka_h2otribe]

Government takes in other taxes. The case being made is that the city wouldn't exist without being living there. So, the local government has a particular interest to enable people to live there by subsidizing.

Private insurance doesn't have the same upside

I don't know if I agree with this but am answering your question fwiw

[ElevenLathe]

I think in this scenario the theory is that the city will take in more in taxes than they spend in subsidies. I have no idea how realistic that is, but it seems very similar to saying that they could buy this person a house in exchange for just living in it and paying taxes, which is something I've never heard of happening.

[reshlo]

It’s not enough to take in more in taxes than they spend in subsidies. If they’re spending that resident’s taxes on paying subsidies, there’s none left for paying for the other public services that the taxes are also supposed to pay for.

[ElevenLathe]

Yeah, it seems like it might pencil out if the housing is very cheap to replace (and therefore insure) but the tax revenue you can gain from it is high. Since local taxes are mostly property taxes, this is basically a paradox: if the property is cheap, the taxes will be too.

That said, there are some cities that have a local income tax so, in theory, one can imagine a scenario where, as a development project, some local government convinces high-income artisans or work-from-home workers to move into extremely cheap housing by subsidizing their disaster (flood, fire, earthquake, etc.) insurance. This is again likely a paradox: if high-income people wanted to live there, the housing wouldn't be cheap anymore.

[nothercastle]

The premium on insurance of last resort are quite high they may do enough to cover costs or they may not but it’s hard to Predict and model so private parties don’t bother. The juice just isn’t worth the squeeze so to say

[WalterBright]

When the government regulates the premiums, there will be (inevitably) shortages of companies willing to provide the coverage.