The insurance market is caught in a “vicious cycle,” and this situation has serious implications for homeowners and future economic growth, according to The New Statesman. The issue stems from how the insurance industry functions: it relies on historical claims and weather data to determine risk and set prices. However, more intense extreme weather events are becoming more frequent, leading to increased claims, financial losses for insurers, and new challenges.
California, which faced approximately $275 billion in damages from wildfires in January, established a last-resort insurance plan, known as FAIR (Fair Access to Insurance Requirements), in 1968. Journalist Christopher Flavelle noted that between 2020 and 2024, the number of homeowners relying on this plan more than doubled. This increase is due to insurers issuing nonrenewal notices or pulling out of high-risk states. Areas in America’s heartland have also been affected.
Despite the challenges, insurers across the globe continue to invest in notoriously polluting dirty energy companies. The burning of gas, oil, and coal accounts for more than 75% of human-caused pollution, which drives up global temperatures and supercharges extreme weather. This ongoing support of the fossil fuel industry, which has been documented to try to hide its negative environmental impact, could lead to an economic slowdown, as internal documents revealed during a House Oversight Committee investigation, as reported by Heated.
As The New Statesman points out, insurers are designed to mitigate risk, and if they can’t play that role, projects may not receive the necessary support. Lloyd’s of London, the world’s largest insurer of dirty fuels, stated that continuing to provide reinsurance for carbon-intensive businesses and projects is becoming increasingly unsustainable. However, only 15 out of 51 of the company’s managing agents have agreed to cease underwriting new coal projects, while 46 continue to underwrite new oil and gas fields.
While Lloyd’s has stated it will not interfere with its managing agents’ underwriting decisions, The New Statesman pointed out that the company has the power to adapt its policies under the Lloyd’s Act 1871 and other Parliamentary acts.
This situation underscores the importance of supporting green initiatives. Consumers can make purchasing choices to support brands and stocks that align with their values.
