BEHIND THE BLAZE — As of this afternoon, more than 1,000 structures have burned in Los Angeles’ Pacific Palisades neighborhood in the last two days. The news gets worse — many of them recently lost the most important thing that families rely on when disaster strikes: insurance. When national insurance company State Farm announced it would drop coverage for tens of thousands of Californians last year, the Pacific Palisades community suffered more policy non-renewals than anywhere in the state, according to a San Francisco Chronicle investigation that relied on California Department of Insurance data. The national insurer planned to scrap 1,626 of 2,342 policies in that zip code, or 69.4 percent. It’s part of a larger trend: California had the nation’s fourth-highest insurance non-renewal rate in 2023 behind Florida, Louisiana and North Carolina, per a report published in December by the Senate Budget Committee . Coastal states face hurricanes and flooding in the East and wildfires in the West, and generally have the highest non-renewal rates in the country — but not exclusively. Nearly three percent of insurance plans in Florida were not renewed in 2023, the report found, compared to just 0.8 percent in 2018. In California, 1.7 percent were not renewed compared to 0.9 percent in 2018. “[The non-renewals] are a signal of market distress,” Sen. Sheldon Whitehouse (D-R.I.), who commissioned the report as chair of the Senate Budget Committee in the last Congress, said today. “It’s deadly, deadly serious.” Insurance is designed to protect homeowners from paying out of pocket for costly rebuilds. But affordability and availability in disaster-prone areas are shrinking as insurers recalculate risk, often driven by climate change that fuels more frequent and intense wildfires, hurricanes and floods. Some states have tried to fill the gap left by private insurers: California, Colorado and Florida all have versions of a Fair Insurance Requirements Plan, a state-backed insurance plan intended as a last resort. The fires ravaging Los Angeles this week, however, could break the state’s 1960s-era FAIR plan, which has become increasingly popular in recent years in fire-prone areas and has been on the verge of bankruptcy for years. Whitehouse has spent the last 2 years using his gavel to investigate insurers who drop coverage or hike rates in regions affected by climate change. He says the fires devastating the Los Angeles area show that few places in the country are safe from disruption. “It’s kind of a shock to the system nationally, and it will make insurers even more cautious about climate-related property risks of any kind in any location,” Whitehouse said, adding it to the “multiple punch” of the Florida hurricanes and the devastation in 2024 in North Carolina. In December, his Senate Budget Committee produced a report on the climate-driven insurance crisis that paints a bleak picture: The increase in non-renewal rates driven by the uptick in climate-related disasters, it says, will continue to destabilize insurance markets — and by extension, housing markets. Property values will continue to decrease for homes that cannot be protected, and could spark a repeat of the 2007-8 housing crisis. “A home too endangered to insure will only become more endangered,” the report states. There isn’t a lot Capitol Hill can do about it, however. The primary paths to solve this, Whitehouse says, are through programs like the flood insurance program, FEMA funding, and addressing climate change. Despite this, a few policy plans are in the works. Ron Wyden is currently circulating legislation that would streamline federal processes to make communities as disaster-resistant as possible, says a spokesperson for the Oregon Democratic senator. A significant 2.4 percent of insurance policies were not renewed in Oregon’s heavily forested Josephine County in 2023, double the figure in 2018. States like Oregon are issuing new regulations intended to make homes better able to withstand natural disasters, but Wyden’s office says the federal patchwork of regulations and incentives is complicated to navigate, uncoordinated, and often leaves tinderboxes mixed in alongside fire-resistant buildings. The patchwork makes it hard for insurers to calculate the risk, and therefore more likely to pull out or hike up rates to an unsustainable level. Wyden’s bill intends to help communities prove to insurance companies that they are coverable and should not be abandoned. Being unable to predict the risk is the beginning of “the cascade that leads to the crash,” Whitehouse says. Shoveling money at FEMA doesn’t solve the problem — which he says can only be solved through addressing climate change. “Moving the deck chairs around on the insurance industry Titanic may provide some temporary distraction,” Whitehouse said. “But when the day comes that this cascade begins, there’s no stopping it.” Camille von Kaenel contributed reporting . Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com . Or contact tonight’s authors at nfertig@politico.com and zcolman@politico.com or on X (formerly known as Twitter) at @natsfert and @zcolman .
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