By seeking to protect people from higher prices, regulators could make the problem worse by pushing insurers out of dangerous areas altogether, experts say. That was already happening: For the ZIP codes most affected by wildfires in 2015 and 2017, the number of homeowners dropped by their insurance companies jumped 10 percent between 2017 and 2018, according to a report released in August by the California Department of Insurance.
The state’s new moratorium is intended to address that problem. But it lasts for only a year. And the state can’t force insurers to pick up new customers.
“Insurers are already dropping customers because of wildfire risk,” Mr. Lara said. “In parts of the state where no insurance company will even return your call, I don’t see how the situation can get worse for residents.”
Other states have occasionally moved to temporarily block insurers from dropping coverage in the wake of natural disasters. Louisiana, for instance, prohibited the cancellation of policies on homes and commercial buildings after Hurricanes Katrina and Rita in 2005 until after repairs on damaged structures were completed.
Mr. Frazier noted that insurers in California had largely expected the latest moratorium, and they had participated in negotiations over the 2018 bill that had authorized the move.
But, he added, regulators and insurers would ultimately need to come together to craft a long-term solution to the broader problems facing the industry. “We’re still going to have to figure out how to update our rules to make sure that we can address the impact of climate change and adapt accordingly,” Mr. Frazier said.
If insurance stops being available in vulnerable areas, whether at a price that people can afford or for any price at all, it might prevent insurance companies from going bankrupt. But the effect would be to leave people less able to recover from disasters as climate change gets worse, Dr. Kousky said.
“As these extreme events change, insurance is going to become ever more important as a financial recovery tool and a climate adaptation tool,” Dr. Kousky said. “The question now is really, what can we do to protect that market before it becomes really problematic.”
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