Serious question JVL - As an ex-Californian and ex-pat, but one that still pays federal and state tax I am confounded as to why the Federal Gov't (Trump/Musk) can threaten to withhold federal aid, while the California Gov't can't do the same? Forget paying federal tax until the majority of our money is returned to California to help pay for this tragedy. Let's stop supporting the Red states that drain our monies and start supporting our own.
I've wondered the same. I'm all for it, but I suspect the weight of the federal government's response would make it ... very difficult. But on the surface a trade of CA tech and defense industries for Walmart and Stuckey's seems fair to me.
Factoid re marine insurance and its origins... it depends how far back you want to go. By 1255 A.D. merchants of the Venetian Empire could document their cargo and insure it against loss.
Against the Gods, by Peter Bernstein, is a really entertaining and informative read about the evolution of the understanding of risk, and the integration of risk pricing into commerce. https://www.browsersolympia.com/item/1bpbfuS7sdw6Jw82r-LdGw
Right wingers will point to this as leftist mismanagement. Of course, Red States Florida, Texas, Louisiana, etc can and do run into the same exact insurance dynamics, coinciding to the progress of climate change. Coincidence? But mentioning this will get you flamed at WSJ.
This article and some of the comments in response are really good. I worked for a large property insurance company. Part of my job was to ensure that the company did the right thing.
Insurance policies are a complicated mix of coverages, exclusions and endorsements. Ask any attorney whether they have read their entire policy, and UNDERSTOOD it.
There are bad apples everywhere, and my company had relatively few, but one of my jobs was to catch them. I worked with good people.
A large problem for insurers and their policyholders is determing what was there before the fire, so they can fairly settle the loss. Sometimes this is because agents fall down on documenting what existed before the fire. It's the insurers responsibility. A tie goes to the policyholder.
The losses from the LA fires are unimaginable at this point. But I'm reasonably optimistic that policyholders will, on balance, be treated well. Hey, some of those insurance adjusters lost their homes too.
Underwriting risk always assumes that there is a way to predict events. But that assumes the past can give us a fair assessment of the future.
In the case of wildfires, that's simply not the case anymore. Climate change is increasing the risk for very straightforward scientific reasons, not least being hotter and longer heat waves in places like SoCal. It's hard enough for most humans to understand risk, and the politicization of climate change makes it that much harder. On top of that, we have the eagerness of Trump and his allies to jump on any disaster with bogus accusations of misdeeds by officials they don't like.
It's crazy ironic that the most dangerous climate denier on the planet finds ways to shift the blame for an event that is made worse by people like him onto anyone he disapproves of. It's pretty obvious that he does not give a rat's ass about the victims, only shoring up his cult.
Hi JVL. I really appreciate your thoughtful commentary, As a volunteer field reporter on the Tech Bro beat, I'd like to let you know that, on the All In podcast today, all the bros took it as axiomatic that climate change is a real thing.
So we have another fault line, in Trump world, that will be interesting to watch, to add to the immigration/H1-B visa fault line. The ultra nerdism of the Bros is going to come into direct conflict with MAGA anti-science no-nothing-ism. This inevitably will have real consequences when we observe the Trump administration grappling with climate policy.
Thanks JVL, for an Excellent Article about fire insurance and the Joan Didion piece. I was born in Altadena and have been watching the fire maps on an app manned by volunteers called “Watch Duty” to see what is still standing and what is gone.. I also remember those winds and the negative “positive ion effect” they had on people but they also cleared out the smog. I am Grateful to Live in SFNow, so I will not be complaining about being cold..
Excellent analysis. I have a friend in northern California who had her insurance cancelled last year and couldn't find another provider. When I asked what she was going to do, she said she would "self-insure." Not living in California, I can only wish her well. I'm sure people in Florida (and we could probably add most of the United States at this point) are going to find themselves in the same situation.
My snarky silent (evil) twin raises her head at this point and wonders why in the world all the insurance companies didn't start bellowing years ago about climate change? Too little too late, but this could be seen coming so long ago as to be shameful. She then asks, "And how will this play out under this current administration who uses loyalty tests to determine winners and losers?"
Actually, the big reinsurance companies have been making noise about this for many years, but our lovely mainstream media never bothered to pick up on it -- too boring, too complicated, no sex, violence, race, or religion content to juice up the clicks and eyeballs.
JVL, you have a nice first draft about insurance with respect to the 2025 LA wildfire disaster. Even though at first blush this is a topic that turns off readers and viewers, insurance is becoming a kitchen table economic issue. Over the next ten years as natural disasters proliferate and intensify, it will become a commonplace concern. Availability of comprehensive homeowners insurance will diminish. (Health and auto, in addition to home owners, insurance premiums will rise well above the general rate of inflation.)
This will have profound effects on communities that will have higher exposure to natural disasters as climate change endures. For instance, I believe that heavily populated areas of the west coast of Florida will see profound changes. The rapid population growth of Cape Coral as well as several other coastal cities will cease. Property values will decline relative to regional and national averages. LA's development patterns will change as people integrate the high risk of wildfires in their housing decisions.
Orrin Pilkey, a retired Duke geology professor, died just days ago. I remember four decades ago his prescient warnings about the inevitable erosion of the North Carolina coast line. He said that it was a futile effort to buttress the sand bar around the iconic Cape Hatteras lighthouse. People listened to his recommendation: move the light house miles inland. They did just that in 1999. The moving of that lighthouse is a good emblematic image of what needs to be done for the next generation: a reverse migration away from high risk areas of repeated natural disasters.
In the 1980s there was the S&L crisis which led to changes in home financing which fed into the 2008 financial meltdown precipitated by unstable subprime mortgages, mortgage-backed security devaluations, and collapsed values of related derivate financial instruments. We are at the beginning of another series of financial crises. This series is sparked by the decline of insurance markets. Not only will government intervention need to be stepped up. But the very painful consequences losing bets in the "moral hazard casino" will play out, as hundreds of thousands, perhaps millions, lose life savings and precious possessions.
The better we face reality, the better decisions we make. The better decisions we make, the safer, healthier and happier we are. Our hearts and minds need to be planted in reality, not Reality TV and its social media variants.
This is particularly upsetting for lower middle class and those living in poverty. They free have very little means to move and many are tied to the communities by family. Eventually those with means will move. We are already seeing some snow birds not returning to Florida. This will leave those without means. Just like we see in flood zones all over the country.
Too bad there are so many posts - nobody will see this important one. The Chumash Indians already conducted small burns each year to put down dangerous tinder that could aggravate inevitable wildfires. California and the LA area hafn't continued Indians' reduction of inflammable understory in forests. No preventive maintenance of forest areas, so far as I am aware. The official commentaries now do mention such efforts but only as an afterthought. there appears to be little learning from hard experience - all the discussion is about peripheral areas.
The federal government owns 47% of the public land in California including hundreds of thousands of acres of forested and chaparral lands. And the area of the various fires is adjacent to the Santa Monica Mountains *National* Recreation Area.
"According to the Congressional Research Service, the state of California has a total acreage of 100.2 million acres. Of that total, 47.70 percent, or 47.8 million acres, belongs to the federal government. From 1990 to 2010, the federal government increased its ownership of land in California by 1.6 million acres.
{snip}
Approximately 52.4 million acres in California are not owned by the federal government..."
That is my point. Republicans love to say that California is not managing their forest lands well, and a lot of the forest is not their land. It’s federal land.
Serious question JVL - As an ex-Californian and ex-pat, but one that still pays federal and state tax I am confounded as to why the Federal Gov't (Trump/Musk) can threaten to withhold federal aid, while the California Gov't can't do the same? Forget paying federal tax until the majority of our money is returned to California to help pay for this tragedy. Let's stop supporting the Red states that drain our monies and start supporting our own.
I've wondered the same. I'm all for it, but I suspect the weight of the federal government's response would make it ... very difficult. But on the surface a trade of CA tech and defense industries for Walmart and Stuckey's seems fair to me.
Factoid re marine insurance and its origins... it depends how far back you want to go. By 1255 A.D. merchants of the Venetian Empire could document their cargo and insure it against loss.
I knew about the reinsurance from Katrina and the mess it left but this explanation really helped clarify. Great Triad.
Against the Gods, by Peter Bernstein, is a really entertaining and informative read about the evolution of the understanding of risk, and the integration of risk pricing into commerce. https://www.browsersolympia.com/item/1bpbfuS7sdw6Jw82r-LdGw
Yes, I'll second that. Brilliant book, and anything but boring, even for non-actuaries :-)>
Right wingers will point to this as leftist mismanagement. Of course, Red States Florida, Texas, Louisiana, etc can and do run into the same exact insurance dynamics, coinciding to the progress of climate change. Coincidence? But mentioning this will get you flamed at WSJ.
This article and some of the comments in response are really good. I worked for a large property insurance company. Part of my job was to ensure that the company did the right thing.
Insurance policies are a complicated mix of coverages, exclusions and endorsements. Ask any attorney whether they have read their entire policy, and UNDERSTOOD it.
There are bad apples everywhere, and my company had relatively few, but one of my jobs was to catch them. I worked with good people.
A large problem for insurers and their policyholders is determing what was there before the fire, so they can fairly settle the loss. Sometimes this is because agents fall down on documenting what existed before the fire. It's the insurers responsibility. A tie goes to the policyholder.
The losses from the LA fires are unimaginable at this point. But I'm reasonably optimistic that policyholders will, on balance, be treated well. Hey, some of those insurance adjusters lost their homes too.
Late to this, love it JVL.
It's like poetry in prose form.
Yes. She was an astonishing woman, and an astonishing writer. The Netflix interview can only engender the deepest respect and even love...
Good one, sir.
Underwriting risk always assumes that there is a way to predict events. But that assumes the past can give us a fair assessment of the future.
In the case of wildfires, that's simply not the case anymore. Climate change is increasing the risk for very straightforward scientific reasons, not least being hotter and longer heat waves in places like SoCal. It's hard enough for most humans to understand risk, and the politicization of climate change makes it that much harder. On top of that, we have the eagerness of Trump and his allies to jump on any disaster with bogus accusations of misdeeds by officials they don't like.
It's crazy ironic that the most dangerous climate denier on the planet finds ways to shift the blame for an event that is made worse by people like him onto anyone he disapproves of. It's pretty obvious that he does not give a rat's ass about the victims, only shoring up his cult.
Hi JVL. I really appreciate your thoughtful commentary, As a volunteer field reporter on the Tech Bro beat, I'd like to let you know that, on the All In podcast today, all the bros took it as axiomatic that climate change is a real thing.
So we have another fault line, in Trump world, that will be interesting to watch, to add to the immigration/H1-B visa fault line. The ultra nerdism of the Bros is going to come into direct conflict with MAGA anti-science no-nothing-ism. This inevitably will have real consequences when we observe the Trump administration grappling with climate policy.
Thanks JVL, for an Excellent Article about fire insurance and the Joan Didion piece. I was born in Altadena and have been watching the fire maps on an app manned by volunteers called “Watch Duty” to see what is still standing and what is gone.. I also remember those winds and the negative “positive ion effect” they had on people but they also cleared out the smog. I am Grateful to Live in SFNow, so I will not be complaining about being cold..
Best, and thanks for your good work. AJW
Excellent analysis. I have a friend in northern California who had her insurance cancelled last year and couldn't find another provider. When I asked what she was going to do, she said she would "self-insure." Not living in California, I can only wish her well. I'm sure people in Florida (and we could probably add most of the United States at this point) are going to find themselves in the same situation.
My snarky silent (evil) twin raises her head at this point and wonders why in the world all the insurance companies didn't start bellowing years ago about climate change? Too little too late, but this could be seen coming so long ago as to be shameful. She then asks, "And how will this play out under this current administration who uses loyalty tests to determine winners and losers?"
So much unnecessary suffering.
Actually, the big reinsurance companies have been making noise about this for many years, but our lovely mainstream media never bothered to pick up on it -- too boring, too complicated, no sex, violence, race, or religion content to juice up the clicks and eyeballs.
JVL, you have a nice first draft about insurance with respect to the 2025 LA wildfire disaster. Even though at first blush this is a topic that turns off readers and viewers, insurance is becoming a kitchen table economic issue. Over the next ten years as natural disasters proliferate and intensify, it will become a commonplace concern. Availability of comprehensive homeowners insurance will diminish. (Health and auto, in addition to home owners, insurance premiums will rise well above the general rate of inflation.)
This will have profound effects on communities that will have higher exposure to natural disasters as climate change endures. For instance, I believe that heavily populated areas of the west coast of Florida will see profound changes. The rapid population growth of Cape Coral as well as several other coastal cities will cease. Property values will decline relative to regional and national averages. LA's development patterns will change as people integrate the high risk of wildfires in their housing decisions.
Orrin Pilkey, a retired Duke geology professor, died just days ago. I remember four decades ago his prescient warnings about the inevitable erosion of the North Carolina coast line. He said that it was a futile effort to buttress the sand bar around the iconic Cape Hatteras lighthouse. People listened to his recommendation: move the light house miles inland. They did just that in 1999. The moving of that lighthouse is a good emblematic image of what needs to be done for the next generation: a reverse migration away from high risk areas of repeated natural disasters.
In the 1980s there was the S&L crisis which led to changes in home financing which fed into the 2008 financial meltdown precipitated by unstable subprime mortgages, mortgage-backed security devaluations, and collapsed values of related derivate financial instruments. We are at the beginning of another series of financial crises. This series is sparked by the decline of insurance markets. Not only will government intervention need to be stepped up. But the very painful consequences losing bets in the "moral hazard casino" will play out, as hundreds of thousands, perhaps millions, lose life savings and precious possessions.
The better we face reality, the better decisions we make. The better decisions we make, the safer, healthier and happier we are. Our hearts and minds need to be planted in reality, not Reality TV and its social media variants.
This is particularly upsetting for lower middle class and those living in poverty. They free have very little means to move and many are tied to the communities by family. Eventually those with means will move. We are already seeing some snow birds not returning to Florida. This will leave those without means. Just like we see in flood zones all over the country.
It makes me wonder how much of my retirement is invested in insurance companies, because I’ve lost a lot this week.
Thank you, JVL. This was interesting. And fascinating about the foehn winds. I will read the rest of Didion's article.
Too bad there are so many posts - nobody will see this important one. The Chumash Indians already conducted small burns each year to put down dangerous tinder that could aggravate inevitable wildfires. California and the LA area hafn't continued Indians' reduction of inflammable understory in forests. No preventive maintenance of forest areas, so far as I am aware. The official commentaries now do mention such efforts but only as an afterthought. there appears to be little learning from hard experience - all the discussion is about peripheral areas.
I think you’re forgetting there is a lot of federally owned land in California. This is land that California and Los Angeles are not responsible for.
The federal government owns 47% of the public land in California including hundreds of thousands of acres of forested and chaparral lands. And the area of the various fires is adjacent to the Santa Monica Mountains *National* Recreation Area.
"According to the Congressional Research Service, the state of California has a total acreage of 100.2 million acres. Of that total, 47.70 percent, or 47.8 million acres, belongs to the federal government. From 1990 to 2010, the federal government increased its ownership of land in California by 1.6 million acres.
{snip}
Approximately 52.4 million acres in California are not owned by the federal government..."
From Ballotopedia, article includes a Table and a Map. https://ballotpedia.org/Federal_land_policy_in_California#Land_ownership
That is my point. Republicans love to say that California is not managing their forest lands well, and a lot of the forest is not their land. It’s federal land.
And they don't want to be bothered with facts....
Well…yeah